Nearly $30 Billion Oil Debt Blew Out in 2015, at Increasing Pace
Jan. 11, 2016 (EIRNS)—Oil Price reported Jan. 9 that 42 oil production and exploration companies went bankrupt in U.S. and Canadian shale gas regions in 2015, with an accelerating pace shown by the fact that seven of them became insolvent in December. Some $27.85 billion in debt went up in ... carbon dioxide? in these bankruptcies, $5.1 billion of which debt was defaulted in December.
The U.S. shale oil production has finally started to drop significantly, as 37 rigs were shut down in the first week of 2016 alone, about 7% of all on-land rigs. Until now, increasing production at the "most efficient" wells has made up for those shut down, but total production is now falling. Only about 630 total on-land wells are operating of a 2014 level of 2,000; the total of horizontal (shale play) wells has dropped from 1,800 then, to 519 now.
Oppenheimer & Co.’s chief oil analysis, Fadel Gheit, told CNBC Jan. 11, "I think there is a agenda here. Saudi Arabia will not allow prices to recover until they have ‘taken care of’ [i.e., bankrupted] U.S. shale producers"; and Gheit said he expected half of all U.S. producers to go bankrupt.
The average interest rate on energy-heavy "junk debt" in U.S. bond and loan markets has now reached 18.54% (on Jan. 7), very near the record level of June 2009 (19.1%) when that entire bubble had blown out. The West Texas oil price has fallen again, to just above $31, even though now, ISIS is deploying to try to stop all Libyan oil exports by blowing up the oil ports, on top of all the other war threats.