US Shale Industry Faces $300 Billion in Write-downs

Impairments expected to be made by U.S. shale companies in the second quarter could trigger insolvencies as the sector accounts for oil price fall, Deloitte says in a new study.

Derek Brower, Financial Times
US Shale Industry Faces $300 Billion in Write-downs

By the end of May, 18 E&P companies had declared bankruptcy this year. (Source: Hart Energy; Shutterstock.com)

U.S. shale companies could be forced to write down $300 billion of their assets this year, starting in the second quarter, as operators begin to account for the oil-price collapse on their balance sheets, according to a new study.

The huge impairments—about half the net value of the companies’ property, plant and equipment—would increase the sector’s leverage from 40% to 54%, triggering insolvencies and restructuring, says the study by Deloitte, an accountancy.

“As COVID-19 impacts amplify pressures on shale companies through 2020, a wave of impairments may prompt the deepest consolidation the industry has ever seen over the next six to 12 months,” said Duane Dickson, vice-chairman of Deloitte’s U.S. oil and gas business.

Already have an account? Log In

Subscribe now to get unmatched and complete coverage of the Energy industry’s entire landscape!

View our subscription options
  • Access to site wide content
  • Access to our proprietary databases
  • Watch exclusive videos with energy executives
  • Unlimited access to an extensive library of Playbooks, Techbooks, Yearbooks, supplements, and special reports
  • Newly Added! Access to Rextag's Energy Datalink, containing extensive GIS databases of energy assets, production records, processing capacities, physical locations, planned projects, acquisition records, and much more.