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Yet Another Shale Producer Files For Bankruptcy

Eagle Ford producer Lonestar Resources filed for bankruptcy protection under Chapter 11 this week, becoming the latest casualty in the string of bankruptcies in the U.S. shale patch this year. 

Lonestar Resources filed for relief under Chapter 11 in the United States Bankruptcy Court for the Southern District of Texas, as a growing number of U.S. oil and gas producers – from small players to giants – are saddled with debt they cannot repay with oil prices so low.

This week, Oasis Petroleum Inc also filed for a voluntary Chapter 11 process aimed at restructuring that is expected to reduce its debt by US$1.8 billion.  Oasis Petroleum has enough liquidity to maintain operations and expects to emerge from the restructuring process in November 2020, subject to Court approval, the company said.

Dozens of shale producers have already filed for bankruptcy protection this year, with Chapter 11 filings accelerating after oil prices crashed in March and U.S. shale producers curtailed production in the following months.

Notable bankruptcies included Permian producer Rosehill Resources, California Resources, and Denbury Resources. Shale giant Chesapeake Energy also filed for bankruptcy at the end of June.

According to data from law firm Haynes and Boone as of August 31, a total of 13 producers filed for protection in July and August, which, combined with the rest of the filings this year, represents a 62-percent increase over this time last year.

“It’s not quite the level of filings reached in 2016 but a disturbing trend nevertheless. It is interesting to note that the total secured debt involved in 2020 producer bankruptcies to date already exceeds the total amount of secured debt for all producer filings in 2016,” Haynes and Boone said.

“Until full economic activity returns and consumer confidence that the worst of the pandemic is behind us, demand levels will remain depressed. “Lower for longer” remains the watchword for producers and their creditors,” the law firm said.

By Josh Owens for Oilprice.com 

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  • Mamdouh Salameh on October 02 2020 said:
    Let’s hope that US shale oil producers have learnt a salutary lesson from their ordeals that economics always trumps politics. By producing recklessly even at loss to achieve political slogans like “US energy dominance” and “energy independence”, they ended up with billions of debts they can’t repay hence the growing number of producers filing for bankruptcy.

    Moreover, they have been used by the Tump administration for geopolitical gains so as to make false claims that the United States has become the world’s largest crude oil producer. Nothing is further from the truth.

    The US shale oil industry was a bankrupt industry long before the COVID-19 pandemic came on the scene. The pandemic has triggered a collapse of both global oil demand and oil prices causing a meltdown of the shale industry because of its high breakeven price estimated at $48-$71 a barrel. As a result, the shale industry was the hardest hit causing US crude oil production to decline by 6.5 million barrels a day (mbd) so far this year or 50% of claimed US production of 13 mbd. The US Energy Information Administration (EIA) grudgingly admitted to a loss of 3 mbd only from 13 mbd to 10 mbd.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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