A recent survey from Haynes & Boone has found that fifth of US crude oil producers are planning to use their increased cash flow from operations to fund increased production expansion. In addition to cash flow, the oil producers plan to use a combination of bank debt and private equity investment to fund a ramp in production.
Furthermore, 80% of respondents to the survey believed that there would be a rise in borrowing bases, estimated at around ten to twenty percent. This surely a signals a steady improvement for an industry previously thought to be in decline.
The survey also stated that the respondents believed that the next “hot spots” in US oil would be the Eagle Ford and Austin Chalk in Louisiana, as well as the Powder River Basin in Wyoming. Haynes & Boone also estimated that over half of oil product has already been hedged.
With producers having largely hedged, they have safeguarded themselves from any possible sudden downward price shifts that could occur out of the blue. Given that Brent recently just hit $72 however, this doesn’t look likely at this current time due to the geopolitical issues surrounding Syria at the moment.
Finally, bankruptcies in the industry are also becoming less common, according to the results of the survey. Buddy Clarke, Haynes & Boone’s Energy Practice Co-Chair, stated “The number of E&P bankruptcy filings has continued to drop off as most financially distressed producers have restructured their debt, either through the bankruptcy process or outside of bankruptcy.”
However, he also went on the record to comment “the magnitude of some recent producer filings show that the increase in oil prices since 2016 has not been enough for some larger independents to pull out of the financial death spiral caused by the oil price collapse that started in late 2014.” While the quantity of bankruptcies may have fallen, the risk still remains for many.
With increased production expected, IWS Energy are perfectly placed to assist the producers with their expanded water disposal needs, particularly in the Powder River Basin in Wyoming. For further enquiries, please get in touch with us at info@iwsenergy.com.
(Sourced from oilprice.com)