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

Major oil companies are considering their options and weighing up opportunities as implications from the global pandemic continue to drive prices down.

By AnsaradaFri Apr 17 2020Debt raising / restructuring, Capital raising, Industry news and trends

oil and gas image
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. 
Lowest oil prices in two decades

Source: Quartz | Data: EIA, MarketsInsider

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.
More bankruptcies on the way

Source: Quartz | Data: Rystad Energy

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.

Quartz | Data: Rystad Energy

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. 

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