Whiting Petroleum files for bankruptcy due to falling oil prices

The oil company Whiting Petroleum has filed for bankruptcy after running out of liquidity as a result of the sharp drop in oil and natural gas prices due to the open war on the energy market between Saudi Arabia and Russia and the sharp drop in demand for COVID-19.

It is the first US shale company to be forced to cease its activity due to the systematic drop in prices for the US barrel, which have fallen between 60 and 70% since the beginning of this year.

Analysts point out that this could be "the first domino company" that is forced to close due to the oil market situation and that other small-scale production companies could follow this same path if the markets continue in this situation.

Whiting Petroleum, whose shares in recent months had lost nearly 90% of their value, is now heading for a restructuring during which they hope to be able to continue some business operations and meet their financial obligations.

The US shale industry has already faced solvency problems last year, and in 2019 alone, 42 oil companies with more than $ 25 billion in accumulated debt filed for bankruptcy, according to a report by the law firm Haynes & Boone.

"The shale in the United States is economically unfeasible. Some areas and plants will return when prices rise," Standard & Poors Global Platts chief analyst Chris Midgley told CNBC.

For his part, the analyst at energy consultancy Rystad Energy Artem Abramov, an expert on shales, said in a note that the bankruptcy of Whiting Petroleum could be explained as a matter of "bad luck".

"From a long-term perspective, Whiting has simply been unlucky in the times and in making several strategic decisions," said the analyst, who alluded to the $ 6 billion purchase of the Kodiak Oil & Gas company just before energy markets will collapse between 2014 and 2016.

It is estimated that in the United States, where production costs are higher than in other parts of the world, energy companies need the price of a barrel to be around $ 20 or $ 25 for production to be profitable.

Currently, the barrel of Texas (WTI) is around $ 20, but it is at the mercy of what happens between Saudi Arabia and Russia, which are already beginning to approach their positions but in recent months they have led an unprecedented price war. This has led them to increase production, seeking to increase their market share, in a context of low demand due to the COVID-19 crisis.


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