US shale: Despite Bankruptcies, US Shale is Not Doomed

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Despite Bankruptcies, US Shale is Not Doomed



Despite Bankruptcies, US Shale is Not Doomed

While news of bankruptcies among U.S. onshore exploration and production (E&P) companies seems to be more frequent these days, Rystad Energy doesn’t believe this indicates doom for the shale industry.

“In a nutshell, we do not believe the recent bankruptcies that have beset a number of shale players are indicative of an industry-wide epidemic,” said Alisa Lukash, a senior analyst on Rystad Energy’s North American Shale team.

Some of those recent bankruptcies include Halcon Resources Corporation, Sanchez Energy Corporation and Alta Mesa Resources, Inc.

Rystad forecasts that the top 40 U.S. shale oil producers will spend about $100 billion in the next seven years on debt installments and interest unless further debt refinancing is applied.  

This group of producers accounted for nearly half of U.S. shale crude production in 2018, according to Rystad, and are now faced with interest payments between $2.6 billion and $5.1 billion annually. Maturities amount to about $71 billion between 2020 and 2026.

A total of $23.7 billion in cash flow from operations was generated in the first half of 2019 with spending being $28 billion on capital expenditures. Rystad sees more than $112 billion in outstanding debt for this group, with a combined enterprise value of $355.5 billion as of September 2019.

“These numbers indicate a lack of financing to deal with the burden of the obligations,” said Lukash. “Given the low levels of external capital additions during the past 10 months, the probability of debt refinancing in the coming quarters seems relatively slim.”

And although Rystad expects more acreage restructuring and mergers and acquisitions (M&A) activity in the industry, they maintain that many operators have combined production growth with balanced spending and debt reductions.

“One should be careful about extrapolating on the basis of a few distressed companies,” Lukash said. “The peer group is very diverse both in terms of acreage quality and in capital efficiency.”




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Permian Oil and Gas to Support 93,000 Jobs in 2020



The Permian Basin oil and gas industry will support 93,201 jobs in 2020, according to the latest forecast from the Texas Independent Producers & Royalty Owners Association (TIPRO).

This is 5,578 more jobs than the sector supported in the first half of 2019 and 12,209 more jobs than the sector supported last year, TIPRO revealed.

“Based on TIPRO’s analysis, including production, pricing and employment trends, we forecast an increase of 5,500 net new oil and natural gas jobs in the Permian between 2019 – 2020,” TIPRO President Ed Longanecker told Rigzone.

“Permian production and employment are expected to rise in the coming year as additional pipeline capacity comes online,” he added.

The TIPRO head also warned, however, that employment growth will be dependent on several factors and could be negatively impacted by the escalating trade war with China and growing uncertainty in the market among investors and producers. 

1H 2019 Permian Job Data

According to the latest TIPRO figures, Midland, Texas, was the Permian Basin city with the most unique oil and gas job postings (UP) from January to July this year. Registering 2,328 UPs during the period, Midland ranked above Odessa, which saw 1,296 UPs and Carlsbad, which saw 537 UPs.

Delek US Holdings Inc. had the most UPs in the Permian Basin from January to July, TIPRO highlighted. The business recorded 576 UPs during the period, beating out Basic Energy Services Inc., which had 552 UPs in the region and Baker Hughes Inc., which had 426 UPs.

TIPRO showed that the occupation with the most UPs in the region from January to July was general maintenance and repair workers. This occupation had 711 UPs during the period, compared to heavy and tractor trailer truck drivers, which came in second with 598 UPs, and retail salespersons, which came in third with 319 UPs.

The oil and gas industry with the most UPs in the Permian from January to July was crude petroleum extraction, with 2,141, according to TIPRO. Support activities for oil and gas operations saw 1,197 UPs in the region during the period and petroleum refineries saw 1,029 UPs.

1H 2019 Texas Job Data

The oil and gas industry supported 365,511 direct jobs in the state of Texas during the first half of the year, TIPRO’s 2019 Midyear Texas Energy Report showed. The figure represents an increase of nearly 10,000 jobs over the previous year, TIPRO noted.

Oil and gas jobs in Texas paid an annual average wage of $130,706, or 134 percent more than the average private sector job in the state, the report found. The annual payroll for the Texas oil and natural gas industry was said to have exceeded $47 billion in the first half of 2019.

“The Texas oil and gas industry remains a powerful employer in the Lone Star State, as evidenced by findings of the new mid-year TIPRO report,” Eugene Garcia, chairman of TIPRO, said in a statement sent to Rigzone at the end of August.

“In the first half of the year, the Texas oil and gas industry accounted for 40 percent of all oil and gas jobs nationwide,” he added.

Texas Oil Employees Making Life Better

Todd Staples, the president of the Texas Oil and Gas Association (TXOGA), expressed in a statement sent to Rigzone that employees of the Texas oil and natural gas industry are “making life better” for people in Texas and across the world.

The TXOGA head noted that oil and natural gas are the “building blocks of 96 percent of the everyday essentials we use” and said the women and men who work in the Texas oil and natural gas industry “are growing our economy, funding our schools, building our roads, and most importantly, they’re securing our future”.

In a statement posted on its website back in August, TXOGA highlighted that billions of dollars from Texas oil and natural gas activity is paid each year into the state’s Permanent School Fund and Permanent University Fund. 

The statement added that the industry is investing “untold time, talent and treasure” in Texas schools, and their students and teachers, through “innovative education programs and productive partnerships”.

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