The Smartest Guy In The Oil E&P Room?

Meanwhile, with no suitable buyers willing to take on the risk, many of Rosetta's mid-cap peers who kept on producing and hung in there were dropping like flies -- Quicksilver (KWK), Magnum Hunter (MHR), Swift Energy (SFY), Energy XXI (EEXXF), Goodrich Petroleum (GDP), Ultra Petroleum (UPL), Lynn Energy, etc. all went into Chapter 11. Actually, Rosetta could face bankruptcy itself eventually if not for the Noble Energy deal. 

Who's the Smart Shale Oil Player? 

Low oil prices negatively impacted every E&P including Rosetta's leverage and balance sheet. In addition, Rosetta was also suffering from lower reserves and production prospect than other comparable mid-cap E&Ps. So Rosetta made a swift decision to grab the Noble Energy offer salvaging the best what the company had left before heading into bankruptcy itself.

Hindsight is 20/20, Noble Energy is probably kicking itself right now as it could have picked up Rosetta much cheaper, while Rosetta's Board and executives with golden parachutes are laughing all the way to the bank. 

From this perspective, Rosetta did not sell itself too quick or too cheap, and could be at least one of the smartest guys in the E&P sector. 

350,000 Energy Jobs Lost Worldwide 

WSJ reported that during this worst oil bust in a generation, more than 350,000 lost energy jobs world-wide. About 90,000 of those layoffs have been in the U.S. and 40,000 in Canada.  In May, the Texas Alliance of Energy Producers said Texas has seen 84,000 oil-industry layoffs.

The newly released June payroll report showed the number of people employed in "oil and gas extraction" hit its lowest level in five years. Bloomberg concluded that 

"...at this point, the best hope for oil and gas workers at risk of losing their jobs is that America continues to hire outside of their ranks."


Surviving E&Ps Still Face Headwinds 

Meanwhile, oil and gas debt offerings are drying up as investors look to de-risk and operators look to de-lever. According to WoodMac, the E&P bankruptcies have killed U.S. production of 1 million boe/d, or 6% of U.S. production, and taken $52 billion worth of debt (or asset valuation) off the market, that's 12% of total US E&P sector debt. 

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Michael Filloon 4 years ago Contributor's comment

Not to say that Einhorn doesn't know what he is talking about, but he did highlight some names that will be around for a very long time. He was right, just incorrect about how big the "fallout" would be. At least he swung for for the fence.