As of May 16th – 77 natural gas and oil producers in North America have filed for bankruptcy since 2015, and 35 of those have done so since the start of 2016…
A recent study conducted by PointLogic Energy explored how much production is represented by these 77 companies, where they are located and the overall impact it is having.
The analysis concluded that 4.4 billion cubic feet per day of gas production and 307,000 barrels per day is represented by the bankruptcy companies. The production of these companies represents 5.4% and 3.6% of the lower-48 states’ gas and oil production respectively.
Some major takeaways from the review:
- The volume of gas attributed to the companies in bankruptcy is much larger than the corresponding volumes of oil.
- For Example: In Texas 7.5% of natural gas production is bankrupt while only 2.8% of oil production is represented.
- There are regional winners and losers: Of the major producing states, Texas, Wyoming, Oklahoma and Louisiana bear the brunt of bankruptcy related volumes. The Northeast and Gulf of Mexico appears largely unscathed.
The overall takeaway when reviewing the companies that have filed for bankruptcy is that they are highly weighted to natural gas, rather than oil products.
So what does it mean going forward? If oil prices recover and producers increase drilling we will likely see an increase in associated gas production, regardless of what natural gas prices are doing. Rising gas production from the associated oil production will inflict even more troubles for the bankrupt market segment with storage constraint worries. The remaining summer looks to be a difficult price environment for natural gas producers, especially in the Texas, Oklahoma, Wyoming and Louisiana regions.