Financial Strategies for Oil and Gas Cos. During the Slump

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The authors discuss how the oil price decline due to COVID-19 could lead to changes in the oil and gas industry in this Law360 article.

The boom and bust cycle epitomizes the oil and gas industry. Even so, the oil price decline in the first few months of 2020 is one for the record books. The historic collapse in demand due to COVID-19 restrictions on travel and the general decline in economic activity, on the heels of a price war between Russia and Saudi Arabia, and the ensuing price declines that included the much publicized negative prices in the market for near-term delivery of WTI, has shocked an industry for which shocks are part of its DNA.

A number of questions arise from this most recent episode:

  • Will this shock lead to paradigm shifts in the oil and gas industry, or will this, with the benefit of hindsight, look like one of the many shocks the industry has experienced before?
  • What aspects of financial management will change as a result of the pandemic-induced volatility?
  • Will capital markets shut down for an industry already exposed to high volatility and shocks before the pandemic?
  • How will industry participants and investors address a lack of liquidity, higher costs of capital, valuation challenges, increasing financial distress and potential bankruptcies, and the prospect of contract disputes?

Authors Marc Zenner, Frank Schneider, Allie Schwartz, John Pokorny, and Diego Vega San Martin discuss these questions in an article for Law360.

This article was originally published by Law360 in June 2020.


The views expressed in this article are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Cornerstone Research.

Financial Strategies for Oil and Gas Cos. During the Slump

Authors

Marc Zenner

Independent Consultant;
Former Managing Director and Global Cohead of Corporate Finance Advisory, J.P. Morgan;
Former Managing Director and Global Head of the Financial Strategy Group, Citigroup;
Former Area Chair and Professor of Finance, Kenan-Flagler Business School, University of North Carolina, Chapel Hill

  • Boston

Frank Schneider

Vice President

  • New York

Allie Schwartz

Vice President

  • New York

John Pokorny

Senior Manager

  • New York

Diego Vega San Martin

Associate