The Louisiana Oil and Gas Association says a new survey finds just over half of its members believe bankruptcy is likely because of low oil prices. LOGA spokesperson Kati Hyer says a price war and significant drop in demand have driven oil prices through the floor.
“It costs more to produce than producers can recoup from selling oil on the market. So if people can’t pay to stay in business, well you can imagine what that is going to do to communities and families and local governments,” said Hyer.
The survey also finds that employees in the oil and gas industry have already seen cuts in salary ranging from 6% to 20%. Hyer says 23% of their workforce has been laid off and 78% of operators are taking steps now to shut-in production, which is an alarming rate.
“It’s not as easy as flipping a switch, so sometimes when they go offline, they may never come back. Add to that, producers can lose their leases forever if they shut-in,” said Hyer.
Hyer says 34% of members have applied for federal assistance, but of those, only 25% received the funding they anticipated.
“Of those who received funds, half of them said they weren’t enough to stay in business. Then 75% indicated that it just wasn’t enough to avoid layoffs,” said Hyer.
LOGA is seeking relief from the state legislature, calling on the passage of House Bill 506 which would reduce the severance tax rate by half a percent each year for the next eight years. The House Ways and Means Committee approved the bill yesterday and it heads to the House floor for more discussion.
