Chinanews client Beijing April 3 (Zhang Xu) On April 1, U.S. shale oil giant Whiting Petroleum announced its application for bankruptcy protection, becoming the first " Victim. "
The industry believes that under the current oil price level, most shale oil companies will lose money or will usher in a wave of bankruptcy. On April 2, US President Trump said that after communication with Saudi Arabia and other countries, it is expected that Saudi Arabia and Russia will reduce production, and international oil prices will soon rise more than 20%. Will the rebound in oil prices bring a glimmer of life to these companies?
U.S. oil giant's stock price drops 98.84% a year
Whiting announced on April 1st local time that it has applied to Chapter 11 bankruptcy protection to the Bankruptcy Court of the Southern District of Texas, prompting its shares to be suspended from trading on the New York Stock Exchange.
On the same day, Whiting's stock price plummeted 44% and fell another 16.83% the next day. Yingwei's financial data showed that as of the close of April 2, the stock price of Whiting was only 31 cents, and the market value of Whiting had evaporated by 98.84% in the past year, and the current market value was only $ 28.39 million.
Whiting's stock price is only 31 cents. Data source: Yingwei's financial situation
Founded in 1980, Whiting Corporation was the largest oil producer in the Bakken region of North Dakota, operating primarily in the Bakken Basin, the Tridental Shale Block, and the Denver-Julsburg Basin. As of December 31, 2019, the company had 485.4 million barrels of oil equivalent oil and gas reserves, with crude oil, natural gas condensate and natural gas accounting for 55%, 21% and 24%, respectively.
The company's CEO, Brad Holly, said that considering the price war between Saudi Arabia and Russia and the uncertainty of how long the epidemic will last, the company's proposed restructuring plan is its "best solution."
Although forced into bankruptcy protection, Whiting is not helpless. Last week, Whiting has protected its $ 3.4 billion in net operating losses and is likely to receive federal tax cuts in the future. In addition, Whiting said its creditors have agreed to reduce its debt by about US $ 2.2 billion by exchanging some notes for 97% of new shares, and existing shareholders will own 3% of the company after the reorganization.
According to Whiting, the company has more than $ 585 million in cash on its balance sheet and will continue to operate, and related suppliers, partners and employees will not be affected by bankruptcy and restructuring. It is expected to produce about 42 million in 2020 Barrels of crude oil.
Long before crude oil prices fell, Whiting was facing financial pressure. Prior to the oil price crash of 2015-2016, Whiting bought rival Kodiak Oil & Gas for $ 6 billion (including $ 2.2 billion in debt). After that, Whiting was plagued by debt.
At the end of 2019, Whiting's adjusted operating profit failed to cover its interest payments, and then Wall Street institutional investors issued a warning that Whiting should maintain its operations and the oil price must reach at least $ 50 per barrel.
In March 2020, as the new crown pneumonia epidemic restrained crude oil demand and the crude oil price war initiated by Saudi Arabia, the international crude oil experienced the largest monthly decline in history. / Barrel low.
WTI crude oil futures prices have halved in the past month. Data source: Yingwei's financial situation
Low oil prices have caused most US shale oil companies to have negative cash flows, and there are still many companies facing capital risks like Whiting.
Who will be the next American shale oil company to fall?
Jinzheng crude oil analyst Han Zhengji said that the cost of US shale oil extraction is between 36-47 US dollars / barrel. If oil prices remain at the current level of $ 20-25, most shale oil companies will continue to lose money. Norwegian energy industry consulting firm Rystad Energy has also warned that the vast majority of shale oil miners are not profitable, with more than 100.
Over the past decade, the shale oil industry has relied on debt to substantially increase oil production, making the United States the world's largest oil producer. A survey of 34 shale gas companies by the Institute of Energy Economics and Financial Analysis (IEEFA) shows that the total investment of these companies over the past 10 years was more than $ 189 billion in revenue, including a negative cash flow of $ 2.1 billion last year.
According to data from credit rating company Fitch Ratings, if this continues, many US drillers could default on more than $ 32 billion in high-yield bonds this year, with a default rate expected to be 17%.
There are many energy giants facing the risk of default. Just a few weeks ago, Western Petroleum (NYSE: OXY) spent $ 38 billion to buy rival Anadarko Petroleum. The deal put Western Petroleum among the top US shale oil producers, but it also increased the company's debt.
Under the double blow of the epidemic and the crude oil price war, Western Petroleum was forced to cut its dividend by 86%. This is the company's first cut in dividends in decades. The industry believes that this highly leveraged oil company may be able to escape a calamity by financing, but it will be very hurt.
Data sheet: Gas station staff is refueling the vehicle. Photo by Zhang Yun
In addition, companies such as Apache (NYSE: APA), Devon Energy (NYSE: DVN) and Murphy Petroleum (NYSE: MUR) have joined the ranks of cost reductions and announced a significant reduction of 30%. Or more capital budget.
Apache Petroleum stated in its financial report that the company's full year loss was 3.6 billion U.S. dollars, and a 23% reduction in capital investment compared to 2018.
Continental Resources Corporation (NYSE: CLR) has a net profit of US $ 775.6 million in 2019. It stated in its financial report that the capital budget for 2020 is expected to generate operating cash flow of US $ 2.9 billion to US $ 3 billion and freedom of US $ 350 million to 400 million cash flow. However, the data is calculated at the price of WTI crude oil at $ 55 per barrel, but the current crude oil price is far below this estimated price.
According to estimates by Continental Resources in its financial report, every $ 5 change in the price of WTI crude oil will affect annual cash flow of about $ 300 million. Based on this calculation, under current oil prices, Continental Resources' budget for operating cash flow may even return to zero.
According to Han Zhengji, “Already highly-indebted US shale oil companies will not be able to follow the example of raising funds through borrowing in 2016. Therefore, for US shale oil companies, saving costs and greatly improving efficiency is a great way to pass One of the possible ways of the crisis. In addition, there may be expectations of policies or measures from the U.S. government to help shale oil companies weather this predicament. "
Trump intervenes, oil prices are skyrocketing
In fact, U.S. President Trump is also mediating in order to restore the continued sluggish international oil prices.
According to the Saudi news agency, on April 2, the Saudi Crown Prince and Trump had a telephone conversation on the oil market. Trump also said that on the phone with Russian President Putin and Saudi Crown Prince Mohammed bin Salman, he expected Saudi Arabia and Russia to reduce production by 10-15 million barrels per day.
The picture shows a screenshot of Trump's tweet on April 2.
On the same day, Saudi Arabia called for an emergency OPEC + meeting. The Saudi side said that OPEC + should seek a fair agreement and said that OPEC + will restore the necessary balance in the oil market. OPEC is the abbreviation of the Organization of Petroleum Exporting Countries, and the Chinese name is OPEC.
Stimulated by the above news, on April 2nd, international crude oil futures prices skyrocketed. US WTI crude oil futures rose as much as 30% and Brent crude oil futures rose as much as 46%. As of the close, WTI crude oil futures in the United States rose 24.67% to 25.32 US dollars / barrel; Brent crude oil futures rose 21.02% to 29.94 US dollars / barrel, which are the largest single-day gains in history.
However, foreign media reports said that Russian President Putin spokesman Dmitry Peskov said that the Russian president has not spoken to the Saudi Crown Prince. The market is also skeptical of Trump's claim that if it cuts 10 million barrels of oil per day, it would be equivalent to reducing Russia and Saudi Arabia ’s oil output by nearly 45%, an unprecedented move.
"A single-day increase in oil prices is not enough to make shale oil companies profitable. At present, the price of oil is still far below its cost." Some crude oil analysts said that international oil prices may fall further.
On the one hand, crude oil inventories continued to grow. US Energy Information Administration (EIA) data show that as of March 27, US crude oil inventories increased by 13.8 million barrels to 469.2 million barrels. This is the largest weekly increase since 2016.
The other is weak global demand. Research firm Rystad Energy estimates that global crude oil demand in April will fall by almost 23% year-on-year. Citi also predicts that in the next few weeks, crude oil demand may decline by 20 million barrels per day, while inventory will increase rapidly, and oil prices may continue to fall sharply. (Finish)