- Associated Press - Friday, January 1, 2016

CASPER, Wyo. (AP) - Wyoming oil companies are writing off $41 billion in assets because of the plunging price of crude oil and natural gas and shorter well production lives, with the top five publicly traded companies taking financial hits for the first nine months of 2015.

Analysts say the write-offs represent many wells that will have shorter productive lives than initially anticipated, and money oil companies may have to pay for the cost of plugging and abandoning wells.

“For some of these companies it may be crippling because instead of spending money to drill new wells, they will have to spend money to plug and abandon wells that have hit the end of their productive life,” said Ed Hirs, managing director of Hillhouse Resources LLC, a Texas-based oil and gas company.

Hirs said the industry faces more problems in 2016 by having to recognize the wells as noneconomic.

“This is going to restrict these companies in trying to get new capital partners to shore up the balance sheet,” he said.

According to financial filings, EOG Resources and Devon Energy, Wyoming’s first- and second-largest crude producers by volume, recorded write-offs, also known as impairments, of $6.4 billion and $15.5 billion through the first nine months of 2015. Those write-offs were not limited to Wyoming.

Marathon Oil, the third-largest crude producer in Wyoming, listed $381 million in write-offs across its operations through the first three quarters of last year.

Anadarko Petroleum posted $3.6 billion over the same time period, and Chesapeake Energy reported write-offs of $15.4 billion through the first three quarters of 2015.

Oil companies usually estimate the value of a well by multiplying known reserves by the price of oil, and then subtracting the pumping cost. When prices drop to the point where it is no longer economic to pump, companies declare the well an impairment, or a loss, the Casper Star-Tribune reported (https://tinyurl.com/zzd9oh2).

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Information from: Casper (Wyo.) Star-Tribune, https://www.trib.com

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