According to an analysis by the US Energy Information Administration (EIA), the collapse of oil prices in early 2020 led to massive asset write-offs by 40 publicly traded US oil producers. These companies produced 6.1 million bpd of oil in the first quarter of 2020, representing 30% of overall US output. The total write-downs by those companies reached $48 billion worth of assets in this year’s first quarter, marking the largest quarterly reduction in asset value since at least 2015.
Lower crude prices have negatively affected these companies’ proven reserves because they are calculated based on existing economic conditions. As the price of crude oil changes, the value of extracting these reserves also changes. Brent crude oil prices stood at $67/barrel on the first trading day of the first quarter but plunged to $15/barrel on the first day of the second quarter.
The net present value of proven reserves could continue to decrease as oil prices during the second quarter of 2020 remain below the 2019 levels. These 40 companies are expected to release their second-quarter results in August. Two of them: Extraction Oil & Gas Inc and Whiting Petroleum Corp announced bankruptcy in the second quarter
