Lower Oil Prices Could Blow a $300 Billion Hole in the Balance Sheets of U.S. Oil Companies

Lower oil prices have a significant effect on the financials of oil companies. Not only do weaker prices cut into their cash flows, but they also impact asset values. Because of that, companies need to write down the value of their assets, which puts a lot of stress on their balance sheet.

With crude prices plunging earlier this year, oil companies in the U.S. will likely write down a substantial amount of assets in the coming quarters. According to an estimate by auditor Deloitte, the sector might need to write off as much as $300 billion in assets, with a sizable portion of that likely coming when oil companies report their second-quarter results. Those write-offs could have a significant impact on the sector's access to credit, which might force more drillers to file for bankruptcy. 

Image source: Getty Images.

Continue reading

Source Fool.com