Last month, we discussed the increase in oil and gas
bankruptcy filings since May of 2019 – the full blog post can be found here. Haynes and Boone, LLP released a new Oil
Patch Bankruptcy Monitor as of September 30, 2019, which can be found here,
showing that even more have been added to the list.
Since our last post on the subject, which reflected the August 2019 data, seven more companies have filed for bankruptcy in the last month or so, according to the September Oil Patch Bankruptcy Monitor.
In addition to the fact that seven
more companies have been added to the list, the map of 2015-2019 E&P
Bankruptcy Filings By Location found in the September
Oil Patch Bankruptcy Monitor is similarly concerning; Texas is reportedly
leading the charge with 89 filings, followed by Delaware with 31 filings,
Canada with 18 filings, and Colorado and Louisiana with 11 filings each.
The September Oil Patch Bankruptcy Monitor also shows that the third quarter of 2019 has been the highest quarter of cumulative North American E&P Bankruptcy Filings since 2015…the upward trend of this graphical depiction is startling. As of the publication of this blog, according to Bloomberg Energy, WTI Crude is at $54.01 per barrel and Brent Crude is at $59.92 per barrel, which is a general decline from this time last month. As always, it is difficult to try to discern what this means.
Stay tuned and we will keep you posted on oil and gas industry insights in light of the recent increase in bankruptcies.
According to Haynes and Boone, LLP’s August 2019 Oil Patch Bankruptcy Monitor, there has been an increase in the number of oil and gas bankruptcy filings, especially since May of 2019 – 26 exploration and production (E&P) firms have reportedly filed for bankruptcy through mid-August this year, with debts reportedly totaling $10.96 billion.
A number of factors are
contributing to the increase in oil and gas bankruptcies – oil price is chief
among them. Further, according to the Oil
& Gas 360 article, one of the reasons behind the bankruptcies is, “a
displeased Wall Street cutting off the access to capital for most companies.”
Many are waiting with bated breath to receive updated data on the number of bankruptcies – as of the date of the August Oil Patch Bankruptcy Monitor, there had already been 4 bankruptcies in the month of August, according to the report’s 2019 bankruptcy list.
While not an issue isolated to
the Rocky Mountain region but impacting all producing states, many in Colorado
are concerned that the recent legislation in the state may become yet another
contributing factor to increasing bankruptcies in the energy sector.
Will oil and gas bankruptcies
continue to rise for the rest of the third and fourth quarter? Will Colorado be next to see a wave of
bankruptcies? Only time will tell…
Last night, I made salmon
patties. We have this amazing canned
Alaskan wild salmon and it makes some extremely delicious salmon patties, let
me tell you. As I was making them last
night, one thought kept crossing my mind: I was not in the mood for a basic,
plain, old salmon patty. You know what a
regular salmon patty is? It is boring,
You know what else can feel a little monotonous? Reviewing energy statistics! The U.S. Energy Information Administration (“EIA”) released its Monthly Energy Review, which can be found here. As interesting as this data is, it can still taste a little bland.
Sometimes you need to spice it
up! In salmon patties and in reviewing
data, a little flavor goes a long way.
I added a little Siracha to my
salmon patties last night, whipped up a Siracha aioli sauce, diced up scallions
and celery to add in to my patties and also topped them with dill and sea
salt. Just like that, the flavor profile
was no longer boring. It was totally new
To add a little spice to reviewing energy statistics, one must change the flavor profile by looking at the data with fresh eyes.
The EIA’s Monthly
Energy Review may look like just a bunch of charts and graphs, but a close
review reveals patterns and trends. I
specifically like to look at production, consumption and energy prices.
For example, in the Crude Oil
Price Summary, which can be found here, a
comparison of the yearly average prices tends to show an overall upward
On a more micro-level, oil prices today are also moving upward. According to Bloomberg Energy, WTI Crude Oil is at $55.95 per barrel at the time of the posting of this blog and Brent Crude is at $60.61 per barrel. Both of these prices are on the rise!
What is the spice to add when thinking about energy prices? Projections and forecasts, of course. Both of these considerations add the flavor.
Brent spot prices will average $64/b in the second half of 2019 and $65/b in
2020. The forecast of stable crude oil prices is the result of EIA’s
expectations of a relatively balanced global oil market.
This spice is clearly forecasting that Brent is on the rise from where we sit today.
EIA expects WTI
crude oil prices will average $5.50/b less than Brent prices during the fourth
quarter of 2019 and in 2020, narrowing from the $6.60/b spread during July. The
narrowing spread reflects EIA’s assumption that crude oil pipeline transportation
constraints from the Permian Basin to refineries and export terminals on the
U.S. Gulf Coast will ease in the coming months. In the July STEO, EIA forecast
the Brent-WTI spread to average $4.00/b in 2020.
This spice forecasts that WTI will also raise and the spread will start to shrink up even more.
Thus, the flavor profile on oil
prices is starting to heat up and is projected to get spicier.
TAKEAWAY: Don’t be afraid to spice things up or look at things with fresh eyes to see a new flavor profile!
While oil prices have increased slightly today, they are still lower than many would like to see. As of this post, WTI Crude is at $52.25 per barrel and Brent Crude is at $61.36 per barrel, according to Bloomberg Energy. Of significant impact on oil prices is the fundamental nature of supply and demand – stockpiles are reportedly high (ish) and demand is currently low (ish), and may be going lower.
Oil & Gas 360 released an
article entitled, Goldman
Sees Hard Path to OPEC+ Extension that discusses these supply and demand
issues in the context of the upcoming OPEC meeting in detail. The bottom line is that we may be going into
the OPEC meeting with many uncertainties as to whether production cuts will be
extended. According to the Oil
& Gas 360 article, stockpiles are currently at their highest level
since mid-2017 and this oversupply is present “amid slower demand growth.”
Annual U.S. crude oil
production reached a record 11.0 million b/d in 2018.
EIA forecasts that U.S. production will
increase by 1.4 million b/d in 2019 and by 0.9 million b/d in 2020, with
2020 production averaging 13.3 million b/d. Despite EIA’s expectation for
slowing growth, the 2019 forecast would
be the second-largest annual growth on record (following 1.6 million b/d in
2018), and the 2020 forecast would be the fifth-largest growth on record.
The takeaway from this is easily
summed up by a recent CNBC article entitled, Oil
Steadies as OPEC Supply Cuts Counter Growth Concerns as follows: “While the talk of
prolonged supply restraint is supporting prices, concern about slowing demand
and economic growth has had a bigger impact on sentiment.”
oversupplied? Is there too much oil in
inventories? How much will global oil demand drop?
The headlines are all talking about supply and demand; specifically, oil supply and its impact on the price of oil. As of the posting of this, WTI Crude is sitting at $58.07 per barrel and Brent crude is at $67.85 per barrel, according to Bloomberg Energy, and it has folks wondering where oil prices will go from here in light of oil inventories rising. In fact, Oil & Gas 360 just released an article yesterday entitled, Rough Day for Oil: Crude Plunge Approaches 6% discussing the plunge in oil prices in detail.
By way of a reminder, at the end
of last year, a “glut” is reported to have helped contribute to the fact that
oil prices took a significant tumble to that $45 per barrel mark, that we all
would like to forget happened.
So is another “glut” on the horizon?
Let’s focus on North Dakota for now:
The North Dakota Industrial
Commission (“NDIC”) released its most recent Director’s Cut on May 15, 2019,
which can be found here. North Dakota oil production reportedly
bounced up approximately 54,500 barrels of oil per day from February 2019 to
March 2019. In addition, the number of
producing wells reportedly
increased by nearly 200 wells from February 2019 to March 2019, edging close to
the all-time high number of producing wells which was 15,409 in January 2019.
However, the North Dakota rig
count is reportedly
down 70% from the high; the rig count as of May 15, 2019 was 65 and the
all-time rig count was 218 from 5/29/2012.
Cut also reports that drilling permit activity has returned to normal,
operators continue to maintain a permit inventory that will accommodate varying
oil prices for the next 12 months.
Now let’s look at big picture data:
According to the U.S. Energy
Information Administration (“EIA”), crude oil inventories have risen –
according to EIA data highlights, which can be found here, crude oil inventories as of May 17, 2019
are at 476.8 million barrels, an increase of 4.7 million barrels from a week
earlier, and an increase of 38.6 million barrels from one year earlier. This
increase was reportedly larger than expected, according to the article
Extends Slide to Weekly Lows Near $61 After EIA Report.
It is no secret that supply has increased, so the question remains as to whether supply has increased to the extent that it will cause a glut. The upcoming OPEC meeting in June and many other factors may help us in determining where we sit on the supply front. Stay tuned!
Watching commodity pricing is a
bit like watching a rollercoaster – it goes up one minute, down the next, then
up again and down. Today’s oil prices
are no different. We started the day up
a bit, and this afternoon we are down a bit – the rollercoaster continues. If you were looking for a lazy river-like
pace, with its predictable turns and steady current, commodity pricing is not
the ride for you.
This morning, Bloomberg Energy reports the
following oil prices, which are up a bit from yesterday:
A number of things have
contributed to pricing’s rollercoaster effect, including:
and Demand – U.S. Inventories are High. According to the U.S. Energy Information
Administration’s (“EIA”) Monthly Crude and Natural Gas Production report
released March 29, 2019, which can be found here, U.S. crude oil
production is increasing. In fact,
according to the EIA’s Today in Energy from April 9, 2019 entitled, “U.S. Crude Oil
Production Grew 17% in 2018, surpassing the previous record in 1970,”
“[a]nnual U.S. crude oil production reached a record level of 10.96 million
barrels per day in 2018.”
Cuts – Plus Global Issues. According
to CNN Business article entitled, “There’s
Trouble in OPEC and Oil Prices are up 50%,” trouble in 3 OPEC nations,
namely, Venezuela, Iran and Libya, have contributed to domestic oil price
and a More Cautious Approach.
According to CNN Business article entitled, “Wall
Street Taught Oil Drillers Restraint. That Could Lift Oil Prices,” some of
the price volatility could be related to the more cautious approach some
companies are taking, with the hopes of keeping higher oil prices
sustained. The article also reports
that the sense of restraint in the oil patch could lead to breaking the
There are of course other factors
that may come into play, including politics, pipeline constraints, whether OPEC
continues supply cuts and global supply and demand impacts.
While it is difficult to predict where the rollercoaster is headed, yesterday’s CNBC article entitled, “Prepare for $80 oil this summer as ‘wounded bulls’ rise, RBC warns,” forecasts that “international oil prices will average $75 a barrel in 2019 and consumers may find themselves contending with bouts of $80 crude this summer, RBC Capital markets said.” One thing is for sure, we are along for the ride!
We are constantly trying to predict the future of oil prices – that is just the nature of the beast in this business. So many things begin, and end, with the price of oil for us. Luckily, the U.S. Energy Information Administration (“EIA”) is literally in the business of analyzing and predicting the future of oil prices. Thank goodness, because there are so many factors that go in to predicting commodity pricing, this is not an easy feat!
The EIA’s Short-Term Energy Outlook (commonly known as “STEO”) was released on March 12, 2019 – the full report can be found here.
Brent crude spot prices reportedly averaged $64 per barrel in February, which marks a $5 per barrel uptick since January.
The EIA forecasts that Brent spot prices will average $63 per barrel in 2019 and $62 per barrel in 2020.
These forecasts are great news because they predict price stability, in general, through 2020.
Moving on to the Crude Oil
Markets Review featured in the STEO, which can be found here, the
takeaways are as follows:
The STEO reports that the U.S. active oil rig count reached a 10-month low of 834 rigs as of March 8, suggesting the rate of U.S. crude oil production growth could slow.
Yet, the EIA forecasts U.S. crude oil production will increase by 1.3 million b/d in 2019 and by 0.7 million b/d in 2020.
In addition, the STEO notes the potential for at least two wildcards – OPEC and U.S. production levels, as well as the pace of global oil demand growth. The STEO forecasts that these factors “present considerable uncertainty to oil market balances and price expectations.”
on the current forecast,
however, the EIA expects global inventory builds and rising OPEC spare capacity
will limit significant upward oil price pressures in 2019 and in 2020.”
While it is difficult to predict
what lies ahead for oil prices, stay tuned – we will have our fingers on the
pulse of oil prices. Many factors
influence oil prices and we will keep you apprised of new developments!
This has been quite a year for the energy sector, not only producing states in the Rocky Mountain region, but for the United States as a whole. As we start 2019, let’s first take a look back on 2018 – a year full of relative price stability leading toward an optimistic outlook overall for domestic energy production.