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Illustration: Sarah Grillo/Axios

The shale sector is entering a "great compression" that could bring a "deep consolidation" as companies collectively face hundreds of billions of dollars worth of write-downs on their assets, a new Deloitte analysis finds.

Why it matters: The report shows how depressed oil prices stemming from the COVID-19 pandemic are slated to take a big toll on the sector, which was already struggling with debt and weak cash flow even before the crisis.

By the numbers: "Challenging oil market conditions could prompt the shale industry to impair or write-down the value of their assets by as much as $300 billion — with significant impairments expected in Q2 2020," the report finds.

  • 31% of shale operators are "technically insolvent" when U.S. oil prices are at $35 per barrel, while another 20% are "stressed." Prices are currently in the $39-per-barrel range.
  • Deloitte says roughly 27% of shale oil-and-gas companies are good acquisition targets for oil majors and large independent producers, while many others would be "superfluous," or too risky for buyers.

What's they're saying: Deloitte analyst Scott Sanderson said in a statement alongside the report that "selective" consolidation can help better position the distressed industry,

  • "Especially as the energy transition moves forward, investment in big data, advanced digitalization and sustainability measures can be of paramount importance to long-term survival and success," he said.

Go deeper

Amazon defends working with oil companies to reach its zero-carbon goal

Kara Hurst in Seattle.

Partnering with oil and gas producers is necessary for Amazon and other companies to achieve their climate goals, the tech giant's chief of sustainability, Kara Hurst, said during an Axios virtual event on Thursday.

The big picture: Amazon aims to hit carbon neutrality in 2040, 10 years earlier than the Paris climate accord. The company plans to reach its goal in part by helping companies develop climate-friendly technologies through a $2 billion venture fund. The first recipients were announced on Thursday.

1 hour ago - World

Blinken to visit Ukraine as Russia invasion threat looms

Blinken (R) with President Zelensky. Photo: Efrem Lukatsky/Pool via Getty

Secretary of State Antony Tony Blinken will travel to Ukraine on Tuesday as the country faces an ongoing threat of Russian invasion.

Driving the news: Blinken will meet with Ukrainian President Volodymyr Zelensky and Foreign Minister Dmytro Kuleba, as well as officials at the U.S. embassy in Kyiv to discuss contingency planning. He'll then travel to Berlin to meet German Foreign Minister Annalena Baerbock and attend a meeting of the "Transatlantic Quad" — France, Germany, the U.K. and U.S.

Updated 1 hour ago - World

At least 3 dead after Tonga volcano eruption and tsunami

A satellite image of the explosive eruption of the Hunga Tonga-Hunga Ha'apai volcano on Saturday. Photo: UNICEF/NOAA

At least three people are confirmed to have died in Tonga following the undersea volcanic eruption that sent tsunami waves toward the island nation and across the Pacific over the weekend, officials said Tuesday.

The big picture: Officials reported major damage along the western coast of the main island of Tongatapu, where the capital, Nuku'alofa, was covered in ash and dust, including on the runway of the airport. Officials in Tonga confirmed three deaths in the country's first official statement since the crisis began.