Energy News Today

Reporter’s Notebook: Oil and gas facing its own ‘energy apocalypse’

As the former retail reporter at the Chronicle, I chronicled the fall of once popular stores such as Sears, Toys R Us and most recently, Stage Stores — a reflection of the so-called “retail apocalypse” sweeping the industry.

I recently moved to the energy beat, where I encountered similar challenges facing oil and gas companies: lagging revenue, rising debt and mounting bankruptcies. Like retail, the oil and gas industry — which drives much of Houston’s economy and employs tens of thousands of its residents — appears to be facing its own apocalypse.

The energy sector’s future is looking increasingly grim as Wall Street investment dries up after years of poor performance and as nations are shifting away from fossil fuels. The coronavirus-driven oil crash only exacerbated the industry’s challenges as demand for petroleum products such as gasoline, diesel and jet fuel plunged.

Fitch Ratings expects the default rate for the energy sector to hit 17 percent this year, near the 19.7 percent record set in January 2017. The New York credit ratings agency — owned by Hearst, the parent company of the Houston Chronicle — reports that Chesapeake Energy and California Resources face imminent bankruptcies as sizable bond interest payments loom in the coming weeks.

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Chesapeake and California Resources are not the only distressed companies in the sector. More than 240 U.S. oil and gas companies are expected to file for bankruptcy protection during the next two years, eclipsing the number of bankruptcies in the five years since the last bust, according to Rystad Energy, a Norwegian research firm.

Already, several energy companies have filed for bankruptcy, including Whiting Petroleum, Skylar Exploration, Diamond Offshore, Freedom Oil and Gas and Gavilan Resources.

“Despite the recent relative oil price recovery, dozens of U.S. operators are still threatened by bankruptcies, even at a West Texas Intermediate oil price of $30 per barrel,” Rystad said in its report.

In energy as it is in retail, only the strongest and most well-capitalized companies will survive the economic downturn and make the investment to adapt to an ever-changing…

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2020-06-22 18:02:30

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