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;

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.

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