Forty publicly traded U.S. oil producers wrote down a collective US$48 billion worth of the value of their assets in the first quarter of 2020, just after oil prices collapsed, the Energy Information Administration (EIA) said on Monday.
According to EIA’s analysis of publicly filed financial statements, compiled by data provider Evaluate Energy, the 40 listed companies in the analysis produced a total of 6.1 million barrels per day (bpd) of crude oil and other liquids in the United States, or about 30 percent of all the U.S. liquids production in Q1.
The companies include Occidental, Apache Corporation, Concho Resources, ConocoPhillips, EOG Resources, Marathon Oil Corp, Noble Energy, Parsley Energy, Whiting Petroleum Corporation, and Extraction Oil & Gas, Inc, among others.
The 40 companies representing around 30 percent of U.S. liquids production made the largest asset impairments in Q1 2020 since at least 2015, according to EIA estimates.
“Although companies will not have to value their 2020 proved reserves until the end of the year, these first-quarter adjustments, combined with crude oil prices that have remained much lower than 2019 levels during the second quarter of 2020, indicate that the net present value of proved reserves could continue to decline,” the EIA said.
Asset impairment charges are set to increase in Q2. Occidental Petroleum alone warned last month that it expects to book after-tax impairments of up to US$9 billion of its oil and gas assets in the second quarter due to the collapse in oil prices earlier this year.
A recent study from Deloitte pointed out that the collapse in prices, the economic slowdown, and the crash in demand in Q2 could prompt shale drillers in aggregate to impair or write-down the value of their assets by as much as US$300 billion, with significant impairments expected in the second quarter of 2020. Debts for some companies could become unsustainable, leading to a chain reaction of insolvencies and consolidation in the industry, Deloitte said.
By Tsvetana Paraskova for Oilprice.com