Crude prices have been dropping for a long time now and the effects on the oil and gas industry are not unlike those suffered by telecoms back in the early 2000s. This quarter, 59 oil and gas companies filed for bankruptcy, including this week, when Midstates Petroleum and Ultra Petroleum filed.
Charles Gibbs, a restructuring partner at Akin Gump in Texas, said the U.S. oil industry is not even halfway through its wave of bankruptcies.
"I think we'll see more filings in the second quarter than in the first quarter," he said. Fifteen oil and gas companies filed for bankruptcy in the first quarter.
Some oil producers appear to be holding on, hoping the price of crude stabilizes at a higher level. In February, oil slumped as low as $27 a barrel from peaks above $100 a barrel nearly two years ago. U.S. crude has recovered somewhat, and on Tuesday was trading a little below $44 a barrel. [O/R]
Banks have began cutting back on the borrowing they’re allowing companies in trouble and big mergers have not appeared to help many troubling companies. Heavy use of gas and oil are going to be things of the past at some point—hopefully sooner than later for all of us. There is a possible silver lining for the gas and oil industry. They may be able to still make lots of money and not completely devastate the planet and humans in order to do it.
Seven major oil and gas companies could increase their collective value by roughly $100 billion if they bring their future investments in oil and gas fields in line with plans to limit global warming to 2 degrees Celsius, according to a new assessment.
Investors "may be surprised at just how much value can be created by oil and gas companies in a carbon-constrained scenario," said the report, published Wednesday by the Carbon Tracker Initiative, a think tank based in London.
This is a fact that the business of oil and gas must reckon with because otherwise, they are finished.
"By investing less you actually end up with more," said Andrew Logan, director of the oil, gas and insurance programs at Ceres, a Boston-based non-profit that works with the business community on sustainability and climate change issues. "It's counterintuitive, but the business-as-usual approach effectively destroys capital. You can end up with less than you started."
To maximize returns, oil and gas companies should eliminate future investments in high-cost projects, such as Canada's tar sands or deep undersea reserves, the report stated.
The message to oil and gas companies is simple: invest in all of our futures and you too may have one.