Rising Oil Prices May Mean More Bankruptcies

17 July 2017 Publication

Oil & Gas Financial Journal

The slowly rising price of oil is a welcome change to an industry that experienced its most recent catastrophic price collapse in 2014. Production has resumed and ramped up both onshore and offshore. The trip through the price trough, however, has resulted in likely permanent changes to the industry.

Onshore production has increased at a faster rate than offshore, generally because it is less capital-intensive. Thus, onshore production once again becomes profitable at a lower commodity price point. In contrast, offshore production is a capital-intensive enterprise due to the logistical hurdles of moving equipment and labor several miles offshore in order to pull oil and gas from the ocean floor and bring it to market.

While offshore production remains expensive and logistically complicated, it has become significantly more efficient in recent years. Some of the efficiencies are the result of technological advances, while other efficiencies are the result of intense competitive pressure on service providers to lower the prices charged for their services.

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