Crude is inching above $50 a barrel, shale producers have improved margins, and new export markets in Asia are reasons to be optimistic for the current state of the energy industry in the U.S.
However, there are other indicators that the industry isn’t out of the woods yet. The Organization of the Petroleum Exporting Countries is dealing with internal turmoil while trying to reduce crude output while shale producers are happily pumping their oil into that gap.
The global glut is starting to slowly abate, but some experts attribute that to the higher energy demand from the Northern Hemisphere summer and not from any actual reduction in oil and gas production.
Then there are reports like today; Houston-based Pacific Drilling may file for Chapter 11 bankruptcy if they are unable to privately restructure their debt. Pacific Drilling also reported a net loss for the second quarter of this year. The second quarter loss was $138.1 million and comes after net loss of $98.8 million in the first quarter. As of June 30, 2017, the company’s total outstanding debt stood at $3.0 billion.
Pacific Drilling is a deepwater drilling specialist, with a fleet of seven of the youngest and most advanced drillships.
Pacific Drilling’s chief financial officer, John Boots commented, “We continue to engage in discussions with our shareholders, the bank lenders and the ad hoc group of holders of our public debt on the terms of a restructuring, although there is currently no consensus as to the form or structure of any restructuring.”
Adding to the company’s woes, Pacific Drilling’s chief executive officer, Chris Beckett resigned earlier this week. Taking his place is Paul Reese, the former chief financial officer.
Other offshore drillers face similar straits. Seadrill might have to file for bankruptcy in the near future, and Houston-based Hercules Offshore has already filed twice. Two other Houston drillers, Paragon Offshore and Vantage Drilling, have just recently came out of bankruptcy.
An issue that is just as important, if not more than, is the toll the industry downturn has taken on the workforce. According to Rigzone.com, the total layoffs for the oil and gas industry recently passed the 440,000 mark.
Rigzone surveyed slightly more than 1,500 workers who lost their jobs during the downturn due to layoffs, company restructuring, or workforce reductions. The surveys garnered responses from over 100 countries.
One of the facts that stands out from the results of the survey is the large loss of oil and gas industry experience. Workers with more than 20 years of experience represented 32% of those surveyed, and workers with at least 10 years of experience came in at 60%.
Rigzone’s survey also found that 38% of respondents were still unemployed for various reasons, and 18% of those surveyed now worked in a different industry.
The industry’s hold on recovery is still tenuous, and that is if the “new normal” ever actually becomes a recovery.
Article written by HEI contributor Raymond Arrasmith.