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Coronavirus and Falling Prices Push Louisiana Oil Companies Towards Bankruptcy

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The Louisiana Oil and Natural Gas Association is warning that more than half of its members will soon file for bankruptcy, as the energy industry continues its unprecedented collapse in the face of the global coronavirus pandemic and resulting economic slowdown.

“We feared these outcomes would take place by mid- to late-May, but the crushing weight of the crisis is taking hold much quicker than expected,” Gifford Briggs, the Association’s president, said in a statement announcing the results of a recent survey.

77% of Louisiana Drillers are Shutting in Wells

The Louisiana Oil and Natural Gas Association represents hundreds of exploration, production, and oilfield services companies across the state. These firms have been coping with an historic drop in demand ever since COVID-19 began forcing millions of people around the world to stay home and curtail non-essential travel.

With oil now trading well below the $37 per barrel Louisiana drillers require to turn a profit, 77% of operators surveyed said they had begun to shut in their wells, including recipients of financial aid through the Paycheck Protection Program and Economic Injury Disaster Loan program.  Unfortunately, only 25% of respondents reported receiving the amount of aid they expected. More than 70% said the assistance wasn’t enough to avoid layoffs, and 46% reported the aid was inadequate to keep their business running.

“We have been forced to cut salaries between 6% and 20% for our employees,” one survey respondent said. “I as the owner have cut my salary to zero.”

Over Half of Louisiana Oilfield Workers Face Layoffs by Year’s End

More than 23% of  Louisiana’s oilfield workers have been laid off during the pandemic. According to the Louisiana Oil and Natural Gas Association, another 27% could be out of work by the end of the year.

“We’re one of the largest employers in Louisiana with the highest average wages,” Briggs said. “Just imagine what shut-ins and company closures mean for individuals and communities. These are real dollars and their lack is going to be felt all across the state.”

To ensure Louisiana’s energy industry survives the coronavirus pandemic, the Association has been pushing the state’s legislature to reduce the severance tax on oil and gas production for at least one year. At 12.5%, the Louisiana tax is more than three times higher than Texas and other competitor states.

The group is also lobbying the state and federal governments to provide more storage capacity for excess oil.

“Of the things we can control, we must take bold action to enact immediate changes,” Briggs concluded. “We are looking forward to working with the legislature and the administration to figure out how to keep wells flowing and keep people employed as long as possible.”

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Our Undefeated Oilfield Accident Lawyers are monitoring the impact of the coronavirus pandemic and energy industry collapse on Louisiana workers and their families, and will continue to post updates as new information becomes available.

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