Bankruptcy continued to plague the North American energy industry throughout 2016 with more than $70 billion in debt filed in the upstream sector alone.In total, there have been 232 bankruptcy filings in the U.S. and Canada that represent $96.2 billion in debt since the beginning of 2015, according to a year-end bankruptcy report from Haynes and Boone LLP. That includes exploration and production, oil field services and midstream sectors.
Source: Haynes and Boone: Texas represents bulk of energy bankruptcies since 2015 – Houston Business Journal
Another Houston company that serves the oil industry has filed for bankruptcy — this time it’s Pioneer Carriers LLC, a trucking service that hauls crude oil in the Eagle Ford and Permian Basin.Pioneer is entering Chapter 11 bankruptcy with between $1 million and $10 million in assets and the same range in debts.
Source: Pioneer Carriers LLC files for Chapter 11 – Houston Business Journal
Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply, but it hasn’t worked out that way.
Their owners may be bankrupt, but the sprawling mines of Wyoming’s Powder River Basin are still churning out coal. It is the same story in oil fields along the Gulf Coast and with shale-gas wells in the Rocky Mountains.Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply. It turns out that while bankruptcy filings are up, they have barely impacted fossil-fuel markets.About 70 U.S. oil and gas companies filed for bankruptcy in 2015 and 2016. They now produce the equivalent of about 1 million barrels a day, about the same as before they declared bankruptcy, according to Wood Mackenzie. That represents about 5% of U.S. oil-and-gas output.That resilience has kept energy inventories flush and prices capped. Oil shot to $50 a barrel this summer, but has had trouble making much progress beyond that mark. On Friday, oil futures in New York rose 0.4% to $50.85 a barrel.The theory that bankruptcies would help balance the market “was misguided to begin with,” says Roy Martin, a research analyst at energy consultancy Wood Mackenzie. “And people are starting to come around to that now.”This is exactly the way chapter 11 was meant to work. The process is designed to save companies that can be saved, and many energy companies are using it to lighten their heavy debt loads, adapt to lean times and keep producing.
Source: Bankruptcy Bust: How Zombie Companies Are Killing the Oil Rally – WSJ
Houston-based Key Energy Services Inc. and some subsidiaries expect to file a prepackaged Chapter 11 plan of reorganization by Nov. 8.The restructuring is expected to reduce Key’s debt by $725 million to about $250 million. The onshore, rig-based well-servicing contractor plans to begin Chapter 11 proceedings in Delaware once senior note holders and lenders officially vote on the plan and an $85 million rights offering expires.
Source: Key Energy Services plans to restructure under Chapter 11 – Houston Business Journal
Bob Michele, global chief investment officer at JPMorgan Asset Management, looks at issues in the energy industry as he sees more restructurings coming by the end of the year. Bloomberg’s Javier Blas joins the conversation on “Bloomberg ‹GO›.”
Source: Michele: Energy Restructuring Coming in High-Yield – Bloomberg
High-yield energy bonds, which have risen even as oil slid more than 20 percent in the past two months, may be hit if the commodity dips below the $40 it’s trading at now, according to Barclays Plc strategist Brad Rogoff.“That portion of the high-yield market especially, it looks a little rich with crude at $40,” a barrel, Rogoff, head of global credit strategy research at Barclays Capital, said Monday on Bloomberg TV. “If we drop below, you’ve probably got some downside there.”High-yield energy bonds are on track for their best returns since 2009, with oil recovering from a 13-year low of $26.21 a barrel in February. After rising to $51.23 in June, crude dipped back under $40 on Monday. With that drop, the correlation between speculative-grade bonds and the oil price is at its weakest level since at least 2010.
Source: Beware Junk Energy Bonds Amid Oil Slide, Barclays’s Rogoff Warns – Bloomberg
Linn Energy’s announcement that it has filed for Chapter 11 was significant in that its $8.28 billion in debt is the largest any upstream energy company has filed for bankruptcy in North America in 2016. However, it’s one of dozens so far this year and one of dozens more to come.Seventy-five companies have filed for bankruptcy since the downturn began. The expectation is that the number will climb to 150 filings before it’s over, according to Buddy Clark, a partner in the Houston office of Haynes and Boone LLP.
Source: Haynes and Boone predicts dozens more bankruptcies like Linn Energy – Houston Business Journal
Breitburn Energy Partners LP filed for chapter 11 bankruptcy protection Sunday, taken down by plunging oil prices.Business operations will continue while Breitburn negotiates a restructuring of its balance sheet, continuing talks with creditors that began a month ago, Chief Executive Hal Washburn said in a release.The decision to file for bankruptcy was made when it became “abundantly clear that those negotiations could not be concluded and an appropriate restructuring consummated on an out-of-court basis” in time to avert a cascade of defaults that would have squeezed Breitburn’s liquidity, James Jackson, chief financial officer of a Breitburn subsidiary, wrote in a court filing.Breitburn’s hedging assets, contracts that cushion the company’s cash holdings against price volatility, will be a central factor in restructuring talks, according to the court papers. The company estimates proceeds of its hedging agreements could be up to $500 million. Outside bankruptcy, hedges are “a significant source of liquidity.”In bankruptcy, however, a dispute is brewing with Breitburn’s senior lenders, many of whom are also counterparties to the hedge agreements. The company hopes negotiations will avoid litigation over the question of whether it is entitled to use the hedging proceeds, according to court papers. Meanwhile, Breitburn has come to terms with senior lenders on financing arrangements that will support normal operations in bankruptcy.The Los Angeles company joined a crowd of oil-and-gas firms in bankruptcy, including Linn Energy LLC, which also attracted investors with partnership tax benefits. In April, Breitburn suspended distributions to preferred investors and skipped bond interest payments.Distributions to common shareholders were cut, then suspended last year, as Breitburn took steps to get its finances in line with plunging oil prices.Citing the “prolonged decline in commodity prices,” Mr. Washburn said Breitburn’s existing debt is unsustainable. In papers filed in the U.S. Bankruptcy Court in New York, Breitburn reported assets of $4.7 billion and debts of $3.4 billion as of March 31.
Source: Breitburn Energy Partners Files for Chapter 11 Bankruptcy – WSJ
SandRidge Energy has joined scores of energy companies seeking refuge from the oil crash in bankruptcy court, becoming one of the largest U.S. shale drillers to succumb to the downturn.The Oklahoma City oil company is seeking Chapter 11 bankruptcy protection with a plan in place to turn $3.7 billion in debt to stock, it said Monday. It has about $4 billion in debt and $7 billion in assets, according to court papers.The firm, which has about 800 employees, plans to put up its oil and gas reserves as collateral for a $425 million loan and acquire another $300 million in debt that will at some point convert to equity. It said it would have enough capital to keep running its oil and gas operations, which are mainly in Oklahoma and Texas.“The new capital structure will allow the company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas,” Sandridge CEO James Bennett said in a written statement.SandRidge’s filing comes as U.S. energy bankruptcies are accelerating, and it brings the number of North American oil company bankruptcies since the downturn began to 74, according to Dallas law firm Haynes & Boone.
Source: SandRidge Energy files for Chapter 11 bankruptcy | Fuel Fix
In its bankruptcy filing, Linn listed total debts of nearly $8.28 billion and total assets of more than $11.61 billion. That’s the most debt of any upstream energy company that has filed for bankruptcy in North America in 2016, according to data from Haynes & Boone.