The Growing Wave of Oil & Gas Bankruptcies in 2020
2020 hasn’t been kind to the energy sector, and a growing wave of energy bankruptcies has started to build.
After a difficult year marred by rising geopolitical tensions in the Middle East and crude prices in the $50-60 per barrel range, analysts warned that the energy sector needed a strong recovery to offset a rising (and expiring) mountain of debt.
Instead, the oil patch has seen one bombshell after another, and the impacts are adding up.
Fueling the Wave’s Growth
The new year opened with a U.S. attack on a top-ranking Iranian general in Baghdad, followed by an Iranian counterattack on two bases in Iraq that hosted U.S. military personnel.
Then, the energy industry worried that the Organization of the Petroleum Exporting Countries (OPEC) wouldn’t renew its production deal with non-member countries, causing increased production and negative pressure on crude prices.
All the while, the threat of COVID-19 grew and started to spread. In March, the new coronavirus hit markets hardest, right as the OPEC+ deal collapsed. Russia and Saudi Arabia subsequently flooded the markets with cheap oil, starting a price war to drive out competition.
What developed was the perfect storm of nonexistent demand matched up against oversupply. Crude prices plummeted and hit a historic sub-zero low on April 20th, with futures for West Texas Intermediate (WTI) Crude closing at -$37.63.
The Wave’s Initial Damage
Now, following a renewed OPEC+ deal limiting production agreed upon on April 9th and slowly restarting economies driving up crude demand, prices have started to tick up.
Unfortunately, the damage has already been done and will take a long time to recover. By charting the sector’s bankruptcies over the first half of 2020—tracked by law firm Haynes and Boone, LLP for the U.S. and Insolvency Insider for Canada—we can see the wave start to swell:
|Company Type||Q1 Bankruptcies||Q2 Bankruptcies||Total (H1 2020)|
|Oil & Gas Producer||7||18||25|
For oil and gas producers, the second quarter of 2020 saw 18 bankruptcies, the highest quarterly total since 2016.
So far, they’re largely centered in the U.S., which saw a boom of surface-level shale oil production in the 2010’s to take advantage of rising crude prices. As prices have dropped, many heavily leveraged companies have started to run out of options.
|Company Type||Q1 Total Debt||Q2 Total Debt||Total (H1 2020)|
|Oil & Gas Producer||$1.4 billion||$29.2 billion||$30.7 billion|
|Oilfield Services||$10.8 billion||$13.2 billion||$24 billion|
|Midstream Services||$0.2 billion||$0.2 billion||$0.5 billion|
|Total||$12.5 billion||$42.7 billion||$55.1 billion|
The biggest victim in the first half of 2020 was Chesapeake Energy, a shale giant that declared bankruptcy on June 28 with more than $9 billion in debt.
Canada has also seen an uptick in energy bankruptcies, especially after facing years of stiff competition from U.S. shale producers. However, the number of cases in Canada is far fewer than in the United States.
One reason is that companies staved off bankruptcy or receivership in four of the seven insolvency cases in Canada since January 2020, at least temporarily. Instead, they are seeking protection under the country’s Companies’ Creditors Arrangement Act, giving them a chance to restructure and avoid insolvency.
A Prolonged Fallout
Another reason for the discrepancy in bankruptcy numbers is timing. The energy sector faced its biggest challenges in 2015/2016, causing many companies to take on debt.
Unfortunately, much of that debt is starting to expire, or becoming too difficult to pay off in the current market conditions.
That’s why, despite the wave of bankruptcies caused by COVID-19 gaining steam, the wave will continue well into 2020 and likely beyond.
July has already seen more companies declaring bankruptcy or seeking creditor protection. The question is, how many more are waiting to surface?
Visualizing China’s Dominance in Battery Manufacturing (2022-2027P)
This infographic breaks down battery manufacturing capacity by country in 2022 and 2027.
Visualizing China’s Dominance in Battery Manufacturing
With the world gearing up for the electric vehicle era, battery manufacturing has become a priority for many nations, including the United States.
However, having entered the race for batteries early, China is far and away in the lead.
Using the data and projections behind BloombergNEF’s lithium-ion supply chain rankings, this infographic visualizes battery manufacturing capacity by country in 2022 and 2027p, highlighting the extent of China’s battery dominance.
Battery Manufacturing Capacity by Country in 2022
In 2022, China had more battery production capacity than the rest of the world combined.
|Rank||Country||2022 Battery Cell|
Manufacturing Capacity, GWh
|% of Total|
|#7||🇰🇷 South Korea||15||1%|
With nearly 900 gigawatt-hours of manufacturing capacity or 77% of the global total, China is home to six of the world’s 10 biggest battery makers. Behind China’s battery dominance is its vertical integration across the rest of the EV supply chain, from mining the metals to producing the EVs. It’s also the largest EV market, accounting for 52% of global sales in 2021.
Poland ranks second with less than one-tenth of China’s capacity. In addition, it hosts LG Energy Solution’s Wroclaw gigafactory, the largest of its kind in Europe and one of the largest in the world. Overall, European countries (including non-EU members) made up just 14% of global battery manufacturing capacity in 2022.
Although it lives in China’s shadow when it comes to batteries, the U.S. is also among the world’s lithium-ion powerhouses. As of 2022, it had eight major operational battery factories, concentrated in the Midwest and the South.
China’s Near-Monopoly Continues Through 2027
Global lithium-ion manufacturing capacity is projected to increase eightfold in the next five years. Here are the top 10 countries by projected battery production capacity in 2027:
|Rank||Country||2027P Battery Cell|
Manufacturing Capacity, GWh
|% of Total|
China’s well-established advantage is set to continue through 2027, with 69% of the world’s battery manufacturing capacity.
Meanwhile, the U.S. is projected to increase its capacity by more than 10-fold in the next five years. EV tax credits in the Inflation Reduction Act are likely to incentivize battery manufacturing by rewarding EVs made with domestic materials. Alongside Ford and General Motors, Asian companies including Toyota, SK Innovation, and LG Energy Solution have all announced investments in U.S. battery manufacturing in recent months.
Europe will host six of the projected top 10 countries for battery production in 2027. Europe’s current and future battery plants come from a mix of domestic and foreign firms, including Germany’s Volkswagen, China’s CATL, and South Korea’s SK Innovation.
Can Countries Cut Ties With China?
Regardless of the growth in North America and Europe, China’s dominance is unmatched.
Battery manufacturing is just one piece of the puzzle, albeit a major one. Most of the parts and metals that make up a battery—like battery-grade lithium, electrolytes, separators, cathodes, and anodes—are primarily made in China.
Therefore, combating China’s dominance will be expensive. According to Bloomberg, the U.S. and Europe will have to invest $87 billion and $102 billion, respectively, to meet domestic battery demand with fully local supply chains by 2030.
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