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The downturn in the U.S. oil industry could lead to more than US$24 billion of lost GDP for Texas alone, if oil prices remain in the $30s, Ed Hirs, Energy Fellow at the University of Houston, told Anadolu Agency.
The oil price collapse, the production curtailments, and the budget cuts have already resulted in layoffs in the industry, and more job losses and oil and gas company bankruptcies are coming, according to analysts and legal experts.
“Many of the endangered companies had some amount of hedging in place to help them survive 12 to 18 months of a price collapse,” Hirs told Anadolu Agency. Yet, the energy economist warned that “the write-downs of asset values and the lack of new loans from banks and other lenders will spell the end for many companies.”
The collapse in the U.S. rig count indicates that up to 70,000 workers may have already lost their jobs in the American oil and gas industry, according to Hirs.
Oil and gas companies, as well as the retail industry, are the worst hit sectors in the COVID-19 pandemic that swept through businesses in Texas, bankruptcy and restructuring lawyers say.
In the five years to April 1, 2020, a total of 215 North American oil and gas producers have filed for bankruptcy, Haynes and Boone said in its Oil Patch Bankruptcy Monitor in early April.
Later in April, companies such as Diamond Offshore Drilling and Whiting Petroleum filed for Chapter 11 bankruptcy protection. U.S. shale gas pioneer Chesapeake Energy said in May it was evaluating a Chapter 11 bankruptcy protection reorganization—along with other options—as the low oil and gas prices weigh heavily on its finances and substantial outstanding debt.
The list is set to grow in coming weeks, according to experts.
According to Rystad Energy, if WTI Crude averages $30 a barrel in 2020, about 73 oil firms in the U.S. may have to file for Chapter 11 bankruptcy protection, and another 170 companies could follow in 2021.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.