Oil and Gas Companies Set to Lose $1 Trillion

• The E&P industry, which includes oil majors, made $2.47 trillion in revenues globally last year, according to Rystad Energy. This year, it’s projected to bring in $1.47 trillion, reflecting a 40% decline year-on-year.
• It comes as the coronavirus pandemic and ensuing lockdowns cripple demand and force companies to slash spending and cancel projects.
• The energy sector is shrinking so dramatically that it’s become the second-smallest group in the whole S&P index.

Oil and gas exploration and production companies, or E&Ps, are slated to lose a staggering $1 trillion in revenues in 2020, according to analysis by research firm Rystad Energy. The E&P industry, which includes oil majors, made $2.47 trillion in revenues globally last year, the firm says, but this year it’s projected to bring in $1.47 trillion, reflecting a 40% decline year-on-year.

It comes as the coronavirus pandemic and ensuing lockdowns cripple demand and force companies to slash spending and cancel projects. Before the virus began to hit economies, Rystad projected E&P revenues for 2020 to reach $2.35 trillion. Returns for 2021 are now also projected lower at $1.79 trillion, compared to a forecast of $2.52 trillion before the pandemic.

The energy sector is shrinking so dramatically that it’s become the second-smallest group in the whole S&P index. The industry now represents just 3% of the index, compared to 15% a decade ago and 30% in 1980.

The International Energy Agency predicts a record demand loss of 9.3 million barrels per day (bpd) in 2020, as all but essential businesses across many major economies are forced to remain closed and millions of residents shelter in place for an indefinite period of time. Air travel has dropped by 95% in the U.S. year-on-year, a reflection of the global travel industry as a whole.

The price of global oil benchmark Brent crude is down more than 60% year-to-date to its lowest in more than 20 years, and this month saw an oil futures contract turn negative for the first time in history as the world runs out of storage space, forcing producers to take rigs offline and shut in production.