One in three oil companies worldwide could be out of business by the end of 2016, according to research released Tuesday.
Roughly 175 major oil firms are facing a serious risk of bankruptcy by December, auditing and consultancy firm Deloitte concluded in a grim report on the state of the world's petroleum sector.
These at-risk companies have a combined debt of over US$150 billion, and many are facing rapidly declining asset values that could make debt repayments harder and harder if oil prices remain low.
“These companies have kicked the can down the road as long as they can and now they're in danger of kicking the bucket," Deloitte's head of corporate restructuring William Snyder told Reuters.
The report was slightly softer on oilfield service providers, which were found to be generally saddled with less debt than producers.
"Service providers tend to be more of a people business with less capital deployed, so it's easier for them to financially flex," Snyder explained.
However, he noted, "Eventually, though, they've got to run out of gas, too."
The report is the latest gloomy prediction for the oil industry, after months of low oil prices.
Earlier this month, energy research firm IHS estimated around 150 oil and gas companies could find themselves filing for bankruptcy by the end of the year if prices don't recover.
A Bank of America forecast suggested the global benchmark, Brent, is likely to recover to around US$53 by the end of the year. Early Tuesday, Brent futures were trading for around US$33, after news of an international deal to curb supply rises.
Russia, Saudi Arabia, Qatar and Venezuela have agreed to freeze production at January levels if other major oil producing nations likewise commit to stabilizing output.
The announcement marked a major reversal for Saudi Arabia, which has consistently rejected calls to cut production, a policy that has been a major driver behind the collapse of oil prices from as high as US$115 18 months ago to as low as US$27 a barrel earlier this month.
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