40% of Oil Producers Will Go Bankrupt if $30 Persists

Based on forward charts at least 40% of US oil producers are headed for bankruptcy.

Inquiring minds are diving into the Kansas City Fed Energy Survey by Chad Wilkerson, to get a better grip on problems facing oil producers. The results are grim.

“District energy activity fell sharply during the first quarter of 2020, with our index dropping to its  lowest level since we began the survey in early 2014,” said Wilkerson. “Expectations for future activity also fell to their lowest level since late 2014, as most firms do not expect energy prices to return to profitable levels this year.”

WTI Survey Price Expectations

• 6 Months: $33
• 1 Year: $42
• 2 Years: $50
• 5 Years: $58

Solvency

61 percent of firms would  remain solvent in the next year if the WTI price of oil would stay at $30 per barrel, and 64 percent of firms would remain solvent if the WTI price of oil would stay at $40. 

Forward Prices

Price data in the above table from MarketWatch.

If those prices hold, the survey estimates about 39% of the oil producers will go bankrupt.

Even at $40, 36% of the firms would go bankrupt.