US bankruptcies and how to avoid them: The costs and benefits of saving E&Ps via royalty exemptions

RYSTAD ENERGY | The Covid-19 pandemic and the price crisis it has brought upon the oil and gas sector have hit the profitability of exploration and production (E&P) companies hard. Despite the recent relative oil price recovery, dozens of US operators are still threatened by bankruptcies even at a WTI oil price of $30 per barrel. A Rystad Energy analysis shows that royalty exemptions could save the day for many of them.

To begin with, our analysis has found that even at an average WTI price of $30 this year, about 73 E&Ps in the US may have to file for Chapter 11 bankruptcy protection, with 170 more following in 2021. The number of bankruptcies could climb even more in lower price scenarios.

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