Oil and gas producers focused on drilling a major shale field in South Texas saw their shares sink on Monday as Tropical Storm Harvey blew through the region.
Drillers in the Eagle Ford region ceased operations and pulled crews as Harvey caused devastating flooding and brought high winds along the Gulf Coast over the weekend. Several refineries in the area were also closed, removing about 25 percent of Gulf Coast refining capacity, according to S&P Global Platts.
“Given the enormous level of rainfall along the Texas Gulf Coast the past 3-4 days, we expect most operators in this area will experience near-term field level and/or takeaway issues,” Capital One Securities analyst Phillips Johnston said in a research note on Monday.
Shares of Carrizo Oil and Gas were down 6.5 percent for the day. Drilling in the Eagle Ford accounts for about 75 percent of the Houston-based independent driller, according to Capital One Securities.
Sanchez Energy and Wildhorse Resources were both down more than 4 percent on Monday. Sanchez drills exclusively in the Eagle Ford, and Wildhorse depends on the region for about 72 percent of its total output.
Shares of EP Energy, which gets about half of its output from the Eagle Ford, sank more than 7 percent on Monday.
Denbury Resources on Monday reported it had shut down operations at Houston area fields, resulting in the temporary loss of about 16 million barrels of oil equivalent production. That is about 27 percent of its total output in the second quarter, according to Capital One.
Patterson-UTI Energy CEO Andy Hendricks said his company operates 21 rigs for drillers in the South Texas area, some of which were being put back to work on Monday as the weather cleared up between San Antonio and the coast.
“We’re already starting to reactivate some of these drilling rigs and some of the completion crews today and tomorrow go back to work,” he told CNBC’s “Closing Bell.”
Drillers in U.S. shale fields inject water, minerals and chemicals at high pressure underground to free oil and gas from rock formations, a method known as hydraulic fracturing. The Eagle Ford is one of several major U.S. shale fields.
Correction: Denbury Resources on Monday reported it had shut down operations at Houston area fields. An earlier version misstated the company’s name.