As this issue went to press, a crush of research notes and reports about critical factors for the E&P industry were emerging. Some were inspired by second-quarter earnings calls (see “On The Money” in this issue for more). Others updated crude oil and natural gas prices. One detailed the progress—and potential non-impact on struggling E&Ps—of the U.S. crude oil export movement.

IHS Herold said “gloomy” commodity prices had flushed out asset impairments in the first quarter that would continue into second-quarter results, setting a 10-year record for E&P reserve writedowns.

The IHS analysis tallied first-quarter impairments of 66 small, medium and large North American E&Ps. Their writedowns totaled nearly $29 billion and exceeded the impairment marks of $25 billion for full-year 2014 and the historical 10-year annual average of about $18 billion.

If commodity prices don’t improve, IHS Energy analysts look for “severe, record” impairments to continue through 2015. Not all companies had reported second-quarter earnings by the time of the report, but principal equity analyst Paul O’Donnell said, “Though early in the second-quarter earnings cycle, we have already seen more than $20 billion in additional impairments reported by the group, which brings the year-to-date total to more than $49 billion and puts 2015 on track to blow the 2008 peak out of the water.”

In fact, in mid-August the group already had taken impairments of more than $30 billion for the second quarter.

The commodity prices that banks use for ceiling tests of the worth of assets keep falling. O’Donnell said the test at the current futures strip price would drop to about $53 per barrel (bbl) of oil and $2.80 per thousand cubic feet (Mcf) of gas at year-end. In the first quarter, impairments were tested using a price of $82.71/bbl and $3.88/Mcf for natural gas. These prices lingered in a higher range earlier in the year “because the first-quarter calculation includes seven months during which they exceeded $90 per barrel and $4 per Mcf,” the report noted.

Of companies taking impairments in the first quarter, Apache Corp., Devon Energy and Chesapeake Energy took the worst hit, at $7.2 billion, $5.5 billion and $5 billion, respectively. Apache wrote down assets in Canada and the North Sea as well as in the U.S.; Devon and Chesapeake’s impairments were for U.S. assets only.

Reserve revisions are next. O’Donnell looks for companies that are curbing spending and have weighty debt levels and a large portion of undeveloped reserves to be most at risk for revisions from proved undeveloped to probable reserves.

A price rescue recedes. Raymond James & Associates negatively revised its oil price outlook for the remainder of 2015 and beyond. The analysts based their downward call on record-high Saudi oil production; greater visibility on Iranian oil export recovery; a “substantial and inexplicable” surge in Iraqi production; and the stock market disruption in China and elsewhere, which presages flagging global oil demand.

The revised WTI forecast is $50 for 2015, rising to just $55 in 2016. For Brent prices, they look for $56 this year and $62 next year. A rebound may not come until 2017-2018, when large oil project cancellations will make themselves felt and help lift prices to $70 WTI and $77 Brent.

Would exports help? The oil and gas industry has been beating the drum for lifting the ban on U.S. crude exports for some time, and indicators signal that export approval may soon be a reality. But given that the WTI and Brent differential has nearly disappeared of late, would exports be the price savior E&Ps have looked for?

Research from Cowen & Co. analysts Sam Margolin and Jason Gabelman is not optimistic. They note that evidence is mounting that the U.S. government could be close to lifting the ban—maybe as soon as this fall—but with “global oversupply persisting, U.S. production slowing and U.S. crude price discounts immaterial at the coasts, we see limited immediate impact.”

They emphasize that the coastal price in the U.S. is the determining factor for international demand for U.S. crude exports.

“Importantly, crude oil prices at the Gulf Coast (LLS) are currently $1 per barrel underneath Brent, with the year-to-date discount averaging $2 per barrel. ...It is possible that U.S. exports would compel Saudi Arabia to widen its discounts, although the base case suggests a steady U.S. crude differential of about $2.50 at the coast and about $5 per barrel for WTI.

“The direction of crude production in the U.S. is likely far more impactful to differentials than export legality.”

Comments