Pennsylvania’s natural gas industry – and the tens of thousands of local workers across hundreds of small- and medium-sized regional businesses and building trades unions – is facing historic financial challenges, forcing dozens of energy and supply chain companies to dramatically reduce investments, close their doors, enter bankruptcy and lay off tens of thousands of hardworking men and women.
Yet some in Harrisburg continue to obsess over passing even higher energy taxes, which – as MSC President Dave Spigelmyer reinforced in a recent Post-Gazette op-ed – “would make it more difficult for Pennsylvania to grow shale-related small businesses, building trades and manufacturing jobs” and only exacerbate the already grim industry economic and job outlook.
These same individuals refuse to even acknowledge this deep and painful slowdown, which impacts countless Pennsylvania families and is leaving other energy-producing states that have severance taxes with deep budget shortfalls.
Gov. Tom Wolf, for example, recently said that the energy industry is “showing no signs of slowing down.”
As it’s likely the Governor will once again call for even higher energy taxes in next week’s budget address, consider these facts:
||AlixPartners Study: “Energy Industry to Face a $100 billion-plus Cash-flow Gap in 2016”
Rig Count Hits Lowest Level Since 2010: Pa. lost five drilling rigs over the month of January as the squeeze in oil and gas prices has led to cutbacks in the Marcellus Shale … Overall, there were 590 onshore rigs working across the U.S. … the lowest number of rigs working in the domestic oil and gas industries since April 2010. (Pittsburgh Business Times, 2/1/16)
Wolfe Research: As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017. … North American oil and gas producers are losing nearly $2 billion every week at current prices. (WSJ, 1/11/16)
Haynes & Boone: 42 U.S. energy companies went bankrupt last year, owing more than $17 billion … More pain will come … Bankruptcies are accelerating. (Bloomberg News, 1/19/16)
Wood Mackenzie: “The impact of lower oil prices on company plans has been brutal. What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure.”
DNV GL Study: “The industry has taken painful short-term cost-cutting measures by reducing the capex and headcount and squeezing the supply chain.” (Release, 1/25/16)
Fitch Ratings: “Weak Gas Price Realizations Challenge Marcellus Economics”
Baker Hughes: “The oil and natural gas commodity price rout is showing no signs of abating.”
IHS: “The companies are doing the best they can to survive as long as they can … We don’t see a quick out.”
Oppenheimer & Co. Inc.: As many as half of the independent drilling companies working in U.S. shale fields could go bankrupt before prices stabilize. (AP, 1/12/16)
Moody’s Research: “Excess supply will continue to drag on commodity prices in 2016 in the global oil markets and the U.S. natural gas market.”
U.S. Bank: Expect a fresh round of layoffs, production cuts and bankruptcies in the oil and gas business in early 2016. (USA Today, 1/8/16)