Forty US oil-producing companies collectively posted write-downs, reducing the estimated value of their assets by approximately $48 billion in the first quarter of 2020, according to a statement by the Energy Information Administration (EIA) on Monday.
This marked the largest quarterly adjustment in the asset value of US oil firms since at least 2015, according to the EIA.
The EIA explained that "write-downs reflect negative adjustments in asset values, for example, when a producer acknowledges the value of an oil property has declined to less than the cost of developing it and the company updates its estimate of the property's value."
The EIA blamed low crude oil prices for contributing to significant declines in revenue and the value of these companies’ proved reserves.
Oil prices came under pressure with the global widespread of the novel coronavirus (COVID-19) in the first quarter of 2020.
In April, crude prices were pushed to new lows not seen since 1999 with the de-escalation of global economic growth, the plummet in oil consumption and rising oversupply worldwide.
"The price of Brent crude oil, a global benchmark, fell from $67 per barrel on the first trading day of the first quarter to $15 per barrel on April 1, the first day of the second quarter," the EIA said in its statement.
During the first quarter of 2020, the 40 publicly traded oil companies produced 6.1 million barrels per day (bpd) of crude oil and other liquids in the US, representing about 30% of all US liquids production in the quarter.
The EIA said that "some producers announced shutting in and curtailing a number of oil wells during the quarter," which will impact the second-quarter results of these 40 companies that will be released in August.
The administration noted that two of these companies; Whiting Petroleum Corporation and Extraction Oil & Gas, Inc., have already announced their bankruptcy in the second quarter of 2020.
By Ovunc Kutlu