According to Bloomberg, energy explorers affected by the slump in oil prices are desperately seeking liquidity in their rocks after having exhausted other ways to raise cash.
Companies such as Anadarko Petroleum Corp. and Comstock Resources last month announced they were selling over $2.4 billion in asset sales, according to data compiled by Bloomberg.
Additional companies such as Chesapeake Energy Corp., Exco Resources Inc., Occidental Petroleum Corp. and Whiting Petroleum Corp. have also announced in recent weeks that they, too, are selling assets or exploring this option.
These asset sales are a symptom of companies trying to stay financially stable since the slump in the oil prices began, by trying to raise capital whilst tightening the purse strings. For companies with significant outstanding debt, this strategy may not be enough.
Until July, companies were reluctant to sell assets because oil prices were so low. Therefore, this latest strategy comes after months of other cost-cutting tactics such as negotiating lower fees with suppliers, staffing cuts, company restructuring and sidelining rigs.
Michael Watford, Chief Executive of Ultra Petroleum, said: “It’s clear that the asset market has higher valuation right now than the equity market.
“There is a growing benefit in selling assets to raise money for paying off loans or buying back shares.”