Price wars and the COVID-19 pandemic force major oil companies to seek options

The global economic crisis caused by COVID-19 has particularly impacted the oil industry, especially in the United States.

Lockdown measures and travel bans have driven down demand for oil and gas, and low prices have caused major oil companies to take emergency measures to raise debt or otherwise file for bankruptcy.  The industry also considers itself largely left out of the congressional relief and stimulus packages. 

Major oil companies, including ExxonMobil, Royal Dutch Shell, BP and Total, have already raised $32billion in debt over the past few weeks and US-based Whiting Petroleum Corp filed for bankruptcy last week.

M&A activity in the sector crashed in the first quarter, a report from Enverus shows, with the US reporting $770million in domestic M&A deals – less than a tenth of the quarterly average for the last ten years.

While M&A opportunities are few, there are alternatives. Many oil companies are already looking at opportunities to diversify their portfolios with renewable energy options, such as offshore wind energy.

Given the uncertainty of the current situation, opinions are mixed as to how short-lived this dip will be, and whether prices can be expected to rise back to their previous levels any time soon. How quickly the industry will recover and whether the market will stabilize enough to bring back investor confidence in the sector remains unclear.

Oil & gas companies need to act quickly to implement the capital and cost measures that will keep them afloat long enough to see the situation improve. 

Ansarada’s new Capital Raise Pathways (Debt, Equity or Debt & Equity) allow companies to expedite the process of raising capital - whether it is debt, equity or both - using digitized checklists which outline all documentation to provide and the steps to follow. Having viable data will offer you to understand your current financial situation and allow your advisors to offer options quickly. 

We’ve also launched the COVID-19 Financial Survival Pathway in conjunction with McGrathNicol, financial restructuring experts, to ensure that there is a roadmap for companies to follow during times of economic uncertainty. Both of these Pathways are offered on a no-obligation, free trial basis so that companies can get started - early thinking and planning is critical.