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Illustration: Aïda Amer/Axios

Oil companies in the battered shale patch are starting to bring back some production as prices climb, but a new report underscores how the pandemic is taking a heavy financial toll despite signs of revival.

Driving the news: Fourteen North American producers have filed for bankruptcy thus far during the second quarter, per a tally from the law firm Haynes and Boone, which closely tracks the sector's finances.

  • That's up from five in the first quarter, and there's more to come, the firm projects in the report, which also notes numerous bankruptcies in prior years in the sector where many companies have precarious finances.
  • "It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months," the firm finds.
  • Contractors are also getting battered by industry spending cuts, with many small or highly indebted oilfield serviced companies at risk.

The big picture: The report comes as some companies begin bringing back into production some wells shut down during the worst of the price and demand crisis.

  • Shale producers EOG Resources and Parsley Energy this week announced plans to restore output cuts, Reuters reports.
  • U.S. oil prices, which went into negative territory in April, have rebounded to roughly $36 per barrel. CFRA Research analyst Stewart Glickman tells Bloomberg that prices in the mid-$30s mean that "you’re closer to some break-even point. That’s enough to relax the shut-ins.”
  • But break-even prices vary by producer, and they're still likely too low to keep some companies above water, especially given the heavy debt load many companies were carrying even before the crisis.

What's next: While some of the shut-in wells are returning, there's been an extremely steep drop off in new drilling activity as prices are too low to make new wells profitable.

And existing shale wells decline quickly, so the shut-ins combined with the collapse of new drilling means U.S. production is heading sharply lower and industry investment is dropping off a lot.

  • U.S. production has already fallen sharply from nearly 13 million barrels per day early in the year.
  • The federal Energy Information Administration sees output falling well below 11 million barrels per day later in 2020 and staying there in 2021, while some analysts see ever deeper declines.

Go deeper

Ben Geman, author of Generate
Sep 9, 2020 - Energy & Environment

The yin-yang of Trump's drilling policy

Photo: Alex Wong/Getty Images

It would be easy to feel some whiplash over recent Trump administration moves on oil-and-gas industry access — or lack thereof — to areas currently off-limits.

Driving the news: Trump used a Tuesday stop in Florida — a swing state with a huge electoral vote bounty — to announce an order that keeps the eastern Gulf of Mexico off-limits through 2032.

Resurrecting Martin Luther King's office

King points to Selma, Alabama on a map at his Southern Christian Leadership Conference office in Atlanta in January 1965. Photo: Bettmann/Getty Contributor

Efforts to save the office where Dr. Martin Luther King, Jr., planned some of the most important moments of the civil rights movement are hitting roadblocks amid a political stalemate.

Why it matters: The U.S. Park Service needs to OK agreements so a developer restoring the historic Prince Hall Masonic Lodge in Atlanta — which once housed King's Southern Christian Leadership Conference — can tap into private funding and begin work.

Off the Rails

Episode 4: Trump turns on Barr

Photo illustration: Eniola Odetunde/Axios. Photos: Drew Angerer, Pool/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 4: Trump torches what is arguably the most consequential relationship in his Cabinet.

Attorney General Bill Barr stood behind a chair in the private dining room next to the Oval Office, looming over Donald Trump. The president sat at the head of the table. It was Dec. 1, nearly a month after the election, and Barr had some sharp advice to get off his chest. The president's theories about a stolen election, Barr told Trump, were "bullshit."

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