WASHINGTON, April 27 (UPI) -- A U.S. congressional researcher said some shale oil companies in the country will rebound as oil prices recover, though output will remain under pressure.
The Senate Energy and Natural Resources Committee heard testimony on the potential challenges a once-booming oil industry faces in the weakened energy economy. Michael Ratner, an energy policy specialist for the Congressional Research Service, said the financial challenges run the gamut.
"Companies have cut capital expenditures, laid off workers, filed for bankruptcy protection, sold assets, or been downgraded by credit agencies," he said in his prepared remarks. "Cutting capital expenditures, in particular, will have effects on production beyond the five-year time frame, especially in more challenging areas."
A short-term market report from the U.S. Energy Information Administration finds total U.S. crude oil production declines from the 9.1 million barrels per day expected during the first quarter of the year to an average 7.9 million bpd by third quarter 2017.
Crude oil prices this year have rebounded 58 percent since dropping below $30 per barrel earlier this year. Nevertheless, Dave Lesar, the chairman of field services company Halliburton, said last week that, with revenue down 17 percent from last quarter, "life has changed in the industry."
Despite the recovery, crude oil prices are still 25 percent lower than they were at this point last year. The longer prices stay lower, Ratner said, the harder it will be for companies like Halliburton to survive.
"Nevertheless, some companies will remain financially solid and will weather low prices better," he said. "As prices rise, companies will reassess their strategies."
Jason Bordoff, the director of the Center for Global Energy Policy at Columbia University, told lawmakers there may be opportunities for the energy companies that survive the downturn. Crude oil prices won't be low forever and, in response, U.S. output will rebound.
"And this will likely happen at lower prices than many previously believed because the intense economic pressure of this current downturn has forced oil companies to find new and innovative ways to improve their efficiency, productivity and cost-effectiveness," he said.
White House spokesman Josh Earnest said last week that a balanced energy portfolio suggests the U.S. economy won't take any major hits from lingering weakness in the oil sector.