Deloitte: About 30% of U.S. shale operators are ‘technically insolvent’

first_imgDeloitte: About 30% of U.S. shale operators are ‘technically insolvent’ FacebookTwitterLinkedInEmailPrint分享E&E News ($):After over a decade of growth, U.S. shale drillers have entered a period of “great compression” and extreme volatility that could last years as demand for oil has plummeted during the coronavirus pandemic, according to a new report from consulting and accounting firm Deloitte.Nearly one-third of U.S. shale operators are “technically insolvent” at current oil prices and may seek to be acquired or declare bankruptcy, Deloitte said in its analysis. The contraction could have a “domino effect” on the global oil and gas industry given the outsize role of U.S. shale production, said the report, which was released yesterday.Before COVID-19 hit, oil demand worldwide was already trending downward and the market had shown some instability, mostly due to concerns over climate change, said Duane Dickson, U.S. oil, gas and chemicals leader and a vice chairman at Deloitte. The global pandemic appears to have accelerated an energy transition away from the fossil fuel, he said.With the coronavirus upending global supply chains and forcing many industries into telecommuting, oil demand is not expected to return to pre-pandemic levels “anytime soon,” according to Deloitte’s report. It is unclear when people will resume driving, using ride-share services and flying as much as they did pre-pandemic, said Dickson, co-author of the report.“We see at least three to five years before a recovery of all the major markets occurs,” he said.With Deloitte estimating that about 30% of U.S. shale operators can’t break even when shale prices dip below $35 a barrel, some firms could declare bankruptcy in the next few years, Dickson said. Others could turn to consolidation.[Miranda Wilson]More ($): Pandemic drives U.S. shale into ‘great compression’ — reportlast_img read more