Written By: Lara Shipkovitz
Did you know that nine of the top ten public company bankruptcy filings in 2016 were energy companies? In the past year, Bernstein-Burkley has witnessed a sharp increase in our firm’s representation of energy firms and creditors in insolvency proceedings. We have represented energy companies, creditors, servicers, lessee’s, potential purchasers nationwide. The question is: what facilitated the acute weakening in financial solvency within the energy industry?
Low oil prices and the distress of solar, coal, and oil & gas producers are significant contributing factors to this decline. From January 2015 to December 2016, the number of bankruptcy filings in oilfield services increased from under 5 to 120. The majority of filings were distributed as follows:
- Texas: 59
- Louisiana: 10
- Delaware: 10
- Pennsylvania: 7
Pennsylvania alone had over $60,695,247 in aggregate debt and included the following filings:
- North Shore Energy Services
- Somerset Regional Water Resources, LLC
- Nuweld, Inc.
- Perry Petroleum Equipment Ltd, Inc.
- Patriot One, Inc.
- A-K Supply Company, Inc.
- Royal Flush, Inc.
The rise in oilfield services filings can also be attributed to the crash of crude prices in 2014, which led to more rigs sitting idle. The lack of rig use facilitated a decline in jobs for the service companies that help producers pump oil and gas. And although oil prices have risen to about $52 a barrel, a recent CNBC article written by Tom DiChristopher forewarns that it’s not over. He asserts that the 100+ oil & gas bankruptcy filings in North America since the start of a two-year oil price rout are only half of what’s to come. We could expect 100 more filings by the end of this trend.
Most reports also indicate that the crude market will continue to rebalance itself, while ongoing financial woes will pressure energy sector creditors to negotiate a solution within the bankruptcy process.
The increase in filings is not limited to North America. A recent Deloitte study concluded that a third of the world’s publicly traded oil companies are at a high risk of going bankrupt this year. A recent report on OilPrice.com confirms this prediction, alleging that most crude oil producers in the Middle East, Africa, and the emerging economies of Europe shouldn’t expect better solvency news in 2017.
If you are a lender, creditor or oilfield services company facing these statistics firsthand, or, if you are forecasting these troubles ahead and want to protect yourself, Bernstein-Burkley’s experienced attorneys can provide insight and counsel to prevent you from being another statistic.
