US Banks to Seize Indebted Shale Fields: Press

US banks JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are setting up independent companies to operate oil and gas to avoid losses on loans to producers that could go bankrupt, Reuters reported on April 9 citing sources.

The heavily leveraged US shale industry has been hit hard by the oil price crash. The sharp downturn claimed its first major casualty at the start of this month, when Denver-based Whiting Petroleum filed for bankruptcy. Others such as Chesapeake Energy, Denbury Resources and Callon Petroleum have also hired debt advisors.

While banks typically seek to sell bankrupt assets relatively quickly, current low oil prices would force them to do so at a fraction of their former worth, Reuters said. Instead, they are setting up holding companies to manage the assets until prices recover.

Russia, Saudi Arabia and others in the Opec+ alliance producers reached a tentative deal on April 9 to rein in supply by 10mn b/d. But Mexico has not agreed to implement its share of the cuts, preventing the deal from being finalised. Furthermore, the agreed cuts do not go far enough to account for demand losses caused by the Covid-19 crisis, and major non-Opec+ producers are yet to commit to any reductions. The market situation will be discussed by G20 energy ministers on April 10.