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From: Douglas Grandt answerthecall@me.

Subject:S.2012 must consider there will be bankruptcies
Date:July 18, 2017 at 4:16 PM
To:Colin Hayes (Senate ENR Ctee), Angela Becker-Dippmann (Senate ENR Ctee)
Cc: Michaeleen Crowell (Sen. Sanders), Thomas, Katie (Sanders)

This is the 2nd email I am sending exclusively to ENR Chiefs.

It is clearly fruitless to try and influence the 23 ENR Senators.
I will henceforth express opposition to S.2012 to ENR Chiefs.

Dear Mr. Hayes and Ms. Becker-Dippmann,

S.2012 as passed to the full body and stalled in conference in the last Congress included
no consideration for a likelihood for the worst case scenario: more oil bankruptcies.
My earlier email today included 13) Are More Bankruptcies On The Way For U.S. Oil?
which is included in its entirety hereunder.
I recommend ENR hold hearings for CEOs, CFOs and Boards of Directors to testify as to
their companies' financial health and how they will weather the worst case scenarios.
You need to flesh out industry truths, and compel Petroleum Industry Management to
assure you and the American People that they will act in the Public Interest and in the
National Interest as they exercise their fiduciary duty in the face of imminent debt default,
insolvency and bankruptcy.

Sincerely yours,
Doug Grandt
Putney, VT

Are More Bankruptcies On The Way For U.S. Oil?

By Irina Slav | Jul 17, 2017, 6:00 PM CDT | |

Something thats been whispered about in the last few months is now being talked about
loudly: U.S. oil drillers debts. There have been a few notable warnings that shale boomers
might want to slow down their production boost lest they bring on another price crash, but the
truth seems to be that they cant do it: they have debts to service.
Now that international oil prices are once again on a downward spiral, drillers are facing a new
challenge, according to Bloomberg: their bondholders are no longer optimistic.
Shareholders were the first to start doubting the recovery as it became increasingly evident
that OPECs production cut agreement is failing to have the effect that everyoneor almost
everyoneexpected. Energy stocks have generally been on a slide since the start of the year.
Now creditors are joining shareholders. In June, Bloomberg data shows, junk bonds in the
energy industry lost 2 percent. To compare, last year energy junk bonds were up 38 percent
despite 89 bankruptcies in the sector. The S&P 500 Energy Sector Index has shed 16 percent
since the start of the year. According to one Bloomberg Intelligence analyst, energy sector
bonds are beginning to trade like stocks, and thats not good news for the companies issuing
them. Bonds are as a rule are much more stable than stocks, and bondholders are a calmer
breed than shareholders because the latter get hurt if profits shrink or the company files for
bankruptcy. That the former are getting jittery is a signal that there may be more bad news on
the horizon.
Perhaps the worst such news would be OPEC and its partners deciding to change their price-
influencing strategy and follow the advice of Commerzbanks head of commodities research,
Eugen Weinberg: turn the taps back on. That would be a bold move, and whether OPEC would
make it is very far from certain. Yet it seems to be the only one that would work against shale.
The elephant in the shale room is that despite remarkable advancements in cost-cutting, shale
drillers have needed to borrow heavily in the last few yearsfirst to grow, and then to survive
the downturn. Last year, Moodys warned that oil and gas drillers and service providers face a
debt load of US$110 billion maturing by 2021. Next year alone, the industry would have to repay
US$21 billion. By 2021 this will grow to US$29 billion. Whats more, Moodys said, 65 percent of
that debt is speculative-grade, or junk.
Shale drillers have entered a vicious circle, succinctly described by oil analyst Michael
Fitzsimmons. They boost production because they need to make money to repay their debts.
This production growth fuels the global glut and pressures prices, so the drillers actually make
less money than they would otherwise. Debt-servicing expenses rise, so drillers need to
continue pumping more to make up for lower profit margins.
Its an interesting situation in world oil: U.S. drillers are in all likelihood acutely aware that
they would fare better if they slowed down their production growth, as prices will
certainly rebound as they do every time Baker Hughes reports a decline in the weekly rig
count. Yet, it seems they cant afford to slow down with all this debt looming on their
The global competitors, OPEC, Russia, and their smaller partners must also be aware that
they can do more harm to U.S. shale if they start pumping at maximum capacity. Only
they probably cant afford this, either, not with their budget gaps that were widened by
the first stage of the war on shale when OPEC employed the same tactic. What happens
next will be interesting to watchbe it increased prices or a train wreck.