Hundreds of oil fields will be put on conservation in the near future. The drilling of new wells has stopped. Small US oil producers are on the verge of bankruptcy.
This is what The New York Times says.
As noted in the media, the United States has become the world’s largest oil producer for the first time in decades, but now this fact has become a problem. In any other situation, low oil prices could simulate the American economy, but the oil industry has become so huge that its collapse will hit many industries, companies and millions of Americans.
Oil producers have been borrowing for years to expand their businesses, which could lead to the bankruptcy of many small companies. According to Moody’s Investors Service, they will have to repay a total of $86 billion in debt between 2020 and 2024 alone. Pipeline companies will have to pay $123 billion during the same period.
“The future is very uncertain, because prices are below our production costs”, – comments Texland Petroleum President Jim Wilkes.
His company had over 1.2 thousand wells in the Perm basin. As of today, four clients of Texland have already refused to purchase raw materials. Another one canceled the contracts for supply of 2 thousand barrels of oil per day from May 1, which is almost 30% of the company’s output.
Now Wilkes has to stop production, despite the fact that this procedure is very costly: since the workers have to treat the casing with chemicals so that they are not exposed to corrosion without oil flow. Moreover, there is no guarantee that the suspended well can be restarted.
“April was terrible, but May will be unbearable”, – he said.
Montalban Oil & Gas Operations is forced to seal all its wells as soon as the storage facilities are filled. This will happen in 10 days. Company chief Patrick Montalban has already cut his payroll by 25 percent.
“There’s a bloodbath”, – he complains. – “Can you imagine a minus $37 a barrel?”