Down And Out: Bankruptcy Valuations Portend Production Declines
Projections and reorganization valuations of some recent oil and gas debtors demonstrate that creditors are aiming to ride existing production out of bankruptcy as opposed to drilling their way out of it.
Oil patch producers have been plunging towards bankruptcy for several months now as I have written before. This trend is on pace to continue with WTI still hovering around $40 per barrel. Hopes for even $50 per barrel prices could be cathartic for many, but alas prices have been flat for months now. There are dozens of areas and fields that have become economic at $50 compared to $40. Somewhat ironically, one of the pathways back to higher prices will be the decline of production in the U.S. (if not replaced elsewhere). That appears to be the case for most producers already in Chapter 11 bankruptcy.
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Forbes by Bryce Erickson. Published October 13, 2020.