Oil allies in Congress appear to have eased pressure on the administration to help the struggling industry as states start to reopen and help increase demand. Still, the number of oil industry bankruptcies jumped in the second quarter of this year and many more are expected, a sign that earlier efforts by lawmakers and the recent rise in prices haven’t been enough to relieve the distress in the industry, Roll Call reported. Even though demand is picking up as economies start to reopen, a recent rise in coronavirus cases across the globe and in several states has the industry on the edge and could further slow its recovery. As he pushed for help, Sen. Kevin Cramer (R-N.D.) said he worried that struggling independent domestic oil producers could be gobbled up by larger multinational corporations. “Smaller oil company bankruptcies have been a concern since the beginning of the COVID-19 pandemic, especially with the global oil price war caused by Saudi Arabia and Russia,” Cramer said. “Over-consolidation will not serve North Dakota or domestic energy development well.” Sen. Lisa Murkowski (R-Alaska) suggested that the government can take additional steps to help by buying oil at low prices for the SPR. But lawmakers have so far been unable to move legislation that would provide $3 billion for the Energy Department to make such a purchase. Read more.
In related news, the companies that operate offshore drilling rigs for major oil producers face a second wave of bankruptcies in four years amid a historic drop in energy prices that likely will leave surviving drillers more closely tied to big oil firms, Reuters reported. A collapse of the offshore industry will have broad impact. Drillers and their suppliers have driven innovation that has helped shale and offshore wind companies by pioneering remote monitoring and control, and last year directly generated about 25 percent of global oil production. The offshore services business is the worst performing of the oilfield services sector, with shares of the 10 largest publicly traded down 77 percent since the start of the year. Four of the seven largest offshore drillers — Diamond Offshore Drilling Inc., Noble Corp., Seadrill Ltd and Valaris Plc — have sought protection from creditors or begun debt restructuring talks that could lead to bankruptcy. Two others are reaching out to their creditors. Pacific Drilling last month said that it may need to modify terms of its debt, and was seeking alternative funding in the event creditors would not accept new terms. Shelf Drilling, the ninth largest by revenue, is seeking talks with creditors over loan covenants that take effect next year, executives said. Read more.
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