The oil and shale industries are drowning like never before. Washington is willing to find ways to bail out the industry but many analysts find that negative oil prices we recently witnessed were a warning, not an anomaly. In fact, if oil producers don't cut the acute state of oversupply, these negative figures will be back and perhaps already in a month's time to force them to do it.
This turbulence has led yet another energy company into bankruptcy as Diamond Offshore Drilling Inc (NYSE: DO) is the fifth publicly traded oil company to file for bankruptcy in just the last month, according to BankruptcyData.com.
Turmoil always cleans out weak players and this is a company that was posting losses even before these dark times. With 2,500 workers, it conducted offshore drilling with 15 rigs working for giants such as Occidental Petroleum Corporation (NYSE: OXY) and BP p.l.c. (NYSE: BP). Diamond lost $357 million last year which is nearly twice the loss it posted in 2018 as its revenue dropped 12% to just under $1 billion. With losses in four of the last five years, with only a narrow profit of $18 million in 2017, its losses amounted to $1.2 billion over the last five years. Yet its long-term debt on Dec.31 amounted to almost $2 billion with only $156 million in cash.
Many More Oil And Shale Bankruptcies Are Expected To Follow
Once a rising star of shale, Whiting Petroleum (NYSE: WLL) is the largest to file for bankruptcy so far. With $1.6 billion in sales last year, the company had no other choice but to give up on the first day of April. Just like Diamond Offshore, it also had a net loss in four of the last five years.
How The Mighty Have Fallen
Looking at the top U.S.-listed oil-producing companies' stock prices, ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) have fallen by 35% and 22% respectively, this year as of this writing. Smaller energy companies are having an even worse outlook as their odds of survival are significantly less, which will make a wave of bankruptcy in the energy industry quite likely. Occidental Petroleum (NYSE: OXY) has dropped by more than 62% this year. Its market capitalization recently fell below $10 billion. Last year, Berkshire Hathaway Inc's (NYSE: BRKB) chairman, Warren Buffett, invested $10 billion in Occidental Petroleum to finance its acquisition of Anadarko Petroleum, but this crash is putting the investment at risk.
BP Was better Than Analysts Expected-But Still Bad
BP has reported a loss for the first months of the year due to these exceptionally challenging conditions. The loss of $628 million for the first quarter looks quite bad if you look at the first months of 2019 when there was a profit of $2 billion. The bottom line was better than analysts had expected due to both the coronavirus lockdown restrictions and crashing oil prices. The average oil price in the first quarter of 2020 was $50 a barrel, compared with $63 in the first quarter of 2019.
But BP remains determined, as it will maintain its dividend for the quarter. The company is taking decisive actions to strengthen its finances by reinforcing liquidity, rapidly reducing spending and costs, and driving the cash balance point lower.
The whole industry is left fighting for survival, and is getting help from the Trump administration. But hits are coming from both the supply-and-demand side and on a scale that have never been seen before. Only time will tell which companies can make it to the other side of this crisis, but whenever we get there the oil and gas landscape will look significantly different.
This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: firstname.lastname@example.org Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: email@example.com Questions about this release can be sent to firstname.lastname@example.org
See more from Benzinga
- Amazon Emerges As The Winner Of The COVID-19 Outbreak
- A Recap Of Social Media Earnings
- How COVID-19 Is Impacting Coca-Cola
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.