It was not too long ago that a lender would consider an oil & gas company as a fairly safe credit.  However, the times are changing.

oil and gas donkey

 

It is no secret that the current lower gas prices are due to upstream excess production, either domestically (in the US) or in the mid-east.  This has led to much discussion about the financial future of many upstream exploration and production (“E&P”) companies in the near term as well as to the down-stream companies later in time.

As a corollary to that, most folks outside of Texas are likely not aware that a significant portion of the oil patch is serviced by smaller vendors whom you would likely not know by name.  These are the early warning companies that are expected to fail prior to the larger E&P companies.

Despite financing vehicles and hedging (learned from the last downturn, I am told), some of the E&P companies are already filing bankruptcy or seemingly moving in that direction.

  • Recently, Quicksilver Resources, Inc. and affiliates filed chapter 11 in Delaware (case no. 15-10585).   Quicksilver was (and remains) a E&P company based in Fort Worth, Texas.  It lists over $1BB in liabilities as well as over $1BB in assets.  Click here for the press release.
  • Another E&P company, Sabine Oil & Gas Corp. announced last week that it had retained restructuring counsel as well as a financial advisory firm.  Sabine is the product of merger last year with Forest Oil and claims operations in the Eagle Ford Shale, East Texas, North Texas and offshore.  Its last filed 10-K listed closed to $1BB in assets.  Click here for investor info from the Sabine investor page.
  • And finally, another E&P company I will mention is Dune Energy, Inc. based in Houston who filed bankruptcy in early March 2015 in Austin (case no. 15-10336).  Dune claims operations in Texas and offshore.  Its bankruptcy schedules listed $144.2MM in debt against $229.5MM in assets.  Click here for the Form 8-K.

Of course, there are more E&P companies who have filed (or may).  A quick check of the docket for the Western District of Texas appears to show a few of the smaller service companies who have recently filed chapter 11 also.  Most people I speak with in my field believe that we will see more oil & gas restructuring by the end of the year.  While these companies did very well even during the recent recession, as the economy has gotten better and production has increased, these companies are facing serious financial trouble.