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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.

Updated 1 hour ago - Politics & Policy

Top Pentagon officials contradict Biden on Afghanistan advice

Photo: Carolone Brehman/Pool/AFP via Getty Images

Top military leaders confirmed in a Senate hearing Tuesday they recommended earlier this year that the U.S. keep 2,500 troops in Afghanistan, and that they believed withdrawing those forces would lead to the collapse of the Afghan military.

Why it matters: Biden denied last month that his top military advisers wanted troops to remain in Afghanistan, telling ABC's George Stephanopoulos: "No one said that to me that I can recall."

Poll: Latinas more likely to open their own businesses, despite pandemic setbacks

Janie Isidoro, owner of My Corazon, a Chicano business in downtown Hanford, Calif. Photo: Al Seib/Los Angeles Times via Getty Images

Latinas in the U.S. are more likely to own, or plan to open, their own businesses than non-Hispanic women, despite the pandemic’s disproportionate burden, a recent poll found.

Why it matters: The survey, conducted by Telemundo, the Latino Victory Foundation and Hispanics Organized for Political Equality, suggests Latinas can be a driver of growth for the U.S. even though they have faced greater COVID-19-related setbacks.