Oil companies submit record debt levels to bankruptcy court

Debt related to oil and gas bankruptcies is at an all time high this year and is likely to rise even more as more companies come forward in Chapter 11 during the worst oil crisis in decades.

According to a report released this week by Norwegian research firm Rystad Energy that analyzed data from Dallas law firm Haynes and Boone.

Fewer oilfield exploration, production and service companies declared bankruptcy this year: 84, up from an all-time high of 142 in 2016. Oil bust caused by coronavirus. The average bankruptcy debt per company this year is so far $ 1.05 billion, nearly double the level of $ 576 million in 2017.

Rystad, a Norwegian energy research firm, has warned that it expects 15 to 21 more exploration and production companies to file for bankruptcy by the end of the year, carrying the debt related to over $ 100 billion. Although crude prices have rebounded to around $ 40 a barrel, the recovery remains muted as coronavirus cases rise again around the world and continue to depress economies and demand for crude.

“While the fundamentals of the oil and gas market have improved considerably now compared to April-May, we argue that the wave of North American bankruptcy is not yet over,” said Artem Abramov, head of the shale research at Rystad, in report. “A significant number of small and medium public and private producers still face financial challenges in the current price environment and questions remain about their ability to repay their debt (in the next two years).”

Houston-based Fieldwood Energy, Arena Energy and Chaparral Energy of Oklahoma City, oil and gas producers operating in the Gulf of Mexico, were among the latest companies to file a Chapter 11 application in recent months. Several energy companies have said they were forced to file for bankruptcy after lenders pulled lines of credit as revenues dried up.

Energy bankruptcies were increasing before the coronavirus pandemic wiped out global demand for crude and petroleum products such as gasoline and jet fuel. Oil and gas companies are under increasing financial pressure after many investors pulled out of the sector in 2018 after years of underperformance.

Since the previous oil collapse that ended in 2016, exploration, 448 oilfield production and service companies have filed for bankruptcy, bringing more than $ 272 billion in debt to court, said Haynes and Boone.

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