Executive Summary
Although oil prices have increased over the last 12 months, they fell over the second quarter from $50.54/bbl to $46.02/bbl on June 30, 2017. Over the last couple of years many companies postponed exploration activities and cut capital projects to drill new wells because of the depressed oil prices. However, because oil prices have now settled around $50/bbl, producers are working to cut costs and increase efficiency in this new oil price environment. Ongoing oil prices remain below normal levels, but exploration and production activities have recovered significantly from their low in May 2016. The Baker Hughes North American (U.S.) total oil rig count increased over 14% during the second quarter of 2017 and is up 124% over rig counts 12 months ago. Rig counts increased every week except one during 2017.
After instituting their first production cuts in eight years last quarter, OPEC and non-OPEC producers met in May, agreeing to extend production cuts for nine more months. OPEC’s stated goal was keeping the price of oil above $50 per barrel and aimed to bring stocks down to 2.7 billion barrels. Even if OPEC maintains production cuts, rising U.S. shale oil output is thought to temper the results of OPEC’s reduction in supply.
As oil prices stabilized around $50 per barrel, the number of oil and gas companies filing for bankruptcy declined. Fourteen oil and gas companies went bankrupt in the first half of the 2017 compared to 51 in the first half of 2016.
