US Shale Oil Industry Turning Wells Back On -- Shooting Themselves in the Foot

Many of the world’s

top oil producers 

are still voluntarily 

reducing their output 

to help boost oil prices.

American shale 

oil producers, 

as an industry, 

have never 

made a profit.

In 2020, many of those 

shale drilling companies 

turned off wells 

to reduce output, 

after U.S. oil prices fell.

Millions pf people 

world-wide had 

stopped driving 

and flying due to 

the coronavirus, 

causing a steep 

drop in global 

oil demand.

Now that 

some US states 

and foreign nations 

are reopening, 

oil prices bounced 

back to $40 per barrel .

The desperate shale 

oil producers have 

started to turn 

some of their wells 

back on, even as 

they continue 

to delay most 

new drilling.

Energy has been 

the second-biggest 

contributor to 

this year’s 

bankruptcy 

surge.

Chesapeake is 

preparing for a filing 

while California 

Resources got 

an extension 

until June 30 

to make interest 

payments originally 

due May 29. 

Seadrill  is also 

considering 

bankruptcy.

A Deloitte analysis

 has found that 

almost a third of 

U.S. shale producers 

are technically 

insolvent 

with crude at 

$35 a barrel. 

WTI has been trading 

slightly higher than $35, 

but 15 years of debt-fueled 

production growth 

is catching up with 

many shale producers, 

The spring 2020

 "redetermination season" 

by bankers resulted in 

most high-yield borrowers 

seeing their collateral value

 of oil and gas reserves 

cut by an average of 23%. 

That means energy 

companies have

less access to loans.

The following table 

from Bloomberg 

shows the biggest 

bond issuers who have 

yet to file for bankruptcy, 

and whose bonds 

are trading at 

distressed levels. 

(Note: American Airlines

 is the most likely to survive),

Many are energy companies.

The increased  U.S.

shale oil volumes 

will be far below 

peak levels before 

the pandemic.

In those good old days, 

the U.S. was pumping 

more than 13 million 

barrels a day of crude oil, 

from shale and 

conventional sources

combined -- the most of 

any country in the world.