Analysts see more write-downs coming in U.S. shale sector

first_img FacebookTwitterLinkedInEmailPrint分享Reuters:Oil and gas producers could wipe billions of dollars off the value of U.S. natural gas assets in the months ahead, analysts said on Wednesday, after Chevron Corp became the fourth oil major to slash its estimates for sector values.A long, steady increase in U.S. gas production – much of it a byproduct of the shale oil boom – has pushed prices for the fuel toward a 25-year low. Nearly half of U.S. gas production is a by-product of oil drilling, and therefore does not change in response to weak prices, analysts said. In response, BP Plc, Repsol SA and Equinor ASA have written off more than $11 billion in total from the value of North American shale assets just this year.Industry players, consultants and analysts all said that Chevron’s announcement on Tuesday that it expects to write down the value of its assets by $10 billion to $11 billion this quarter was a sign of more write-downs, with one brokerage highlighting exposure for ExxonMobil.“Chevron writing down assets – especially of this magnitude – isn’t just symbolic, it’s indicative of what’s to come with impairment testing across the entire U.S. exploration and production space,” said Dallas Salazar, head of energy consulting firm Atlas Consulting.Mizuho Securities analysts urged Exxon’s chief executive, Darren Woods, to write down the full value of the company’s $30 billion acquisition of XTO Energy. Exxon bought XTO in 2009 and booked a $2 billion charge in 2017 against the value of natural gas reserves from the buyout.The write-downs are broadly the result of oil companies having assumed much higher future prices for natural gas over the past decade. Shell, for example, said as recently as its 2018 annual report that it expected prices would rise to $3.50 per million British thermal units (mmbtu) in 2020 and 2021 from $3.25 per mmbtu in 2019. BP said it had determined the size of its recoverable reserves based on a long-term price of $4 per mmbtu. The main benchmark for natural gas has been below $2.70 for most of this year and currently stands around $2.28. IHS Markit projects U.S. gas prices will average below $2 per mmbtu next year, the lowest prices since 1995. [Shanti S Nair, Ron Bousso, Jennifer Hiller, Aishwarya Venugopal]More: Chevron’s charge points to billions more in U.S. gas writedowns: analysts Analysts see more write-downs coming in U.S. shale sectorlast_img