{"id":13756,"date":"2015-10-23T07:42:43","date_gmt":"2015-10-23T12:42:43","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13756"},"modified":"2015-10-23T07:42:43","modified_gmt":"2015-10-23T12:42:43","slug":"6-5-billion-in-energy-writedowns-and-were-just-getting-started","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13756","title":{"rendered":"$6.5 Billion in Energy Writedowns and We’re Just Getting Started"},"content":{"rendered":"

$6.5 Billion in Energy Writedowns and We’re Just Getting Started<\/a><\/span><\/h3>\n

The\u00a0oil and gas industry\u2019s earnings season is barely underway, and already there\u2019s been $6.5 billion in writedowns.<\/p>\n

On Thursday, Freeport-McMoRan Inc. reported a $3.7 billion charge for the third quarter, while Southwestern Energy Co. — which has a market value of $4.5 billion — booked $2.8 billion. And that\u2019s just the beginning. Barclays Plc estimated in an Oct. 21 analysis that there could be $20 billion in charges among just six companies. Southwestern\u2019s writedown was double Barclays\u2019 forecast.<\/p>\n

Oil prices have tumbled 44 percent in the past year, and natural gas is down 35 percent, making the write-offs a foregone conclusion from an accounting standpoint. The companies use an accounting method that requires them to recognize a charge when estimates of future cash flow from their properties falls below what the companies spent buying and developing the acreage. The predictions of future cash flow have fallen along with prices.<\/p>\n

Since it\u2019s no secret oil and gas prices have plunged, \u201cthe majority of write-offs are typically non-events,\u201d said Barclays\u2019 analysts led by Thomas R. Driscoll in the report.<\/div>\n

Share Plunge<\/strong><\/p>\n

Southwestern\u2019s shares have declined 64 percent in the past year, and Phoenix-based Freeport-McMoRan\u2019s are down 61 percent.<\/p>\n

Barclays predicted ceiling-test impairments for Apache Corp., Chesapeake Energy Corp., Devon Energy Corp., Encana Corp. and Newfield Exploration Co. All five companies are scheduled to report third-quarter results in November.<\/p>\n

\u201cMany companies will have writedowns as the price of oil is about half of where it once was and gas is also down,\u201d Timothy Parker, a Baltimore-based fund manager at T. Rowe Price Group Inc., said in an e-mail. \u201cHowever, it won\u2019t generally hurt the companies because very few have debt covenants that are linked to book value, which the writedowns affect.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

$6.5 Billion in Energy Writedowns and We’re Just Getting Started The\u00a0oil and gas industry\u2019s earnings season is barely underway, and already there\u2019s been $6.5 billion in writedowns. On Thursday, Freeport-McMoRan Inc. reported a $3.7 billion charge for the third quarter, while Southwestern Energy Co. — which has a market value of $4.5 billion — booked […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[5752,1729,10171],"class_list":["post-13756","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-bloomberg-news","tag-oil-and-gas-industry","tag-writedowns"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13756","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13756"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13756\/revisions"}],"predecessor-version":[{"id":13757,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13756\/revisions\/13757"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13756"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13756"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13756"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}