Oil Patch Bankruptcies

Bankruptcies in the North American oil patch have surged during the past two years. Companies who wrongly assumed that the price of oil would remain above $100 a barrel until the end of time, and borrowed heavily to fund exploration activity, have had the rug pulled out from under them as creditors flee the sector. According to law firm Haynes and Boone’s Oil Patch Bankruptcy Monitor, as of September 7, 2016, 58 producers have filed bankruptcy so far this year, representing approximately $50.4 billion in cumulative secured and unsecured debt. Haynes and Boone has tracked 102 North American oil and gas producers that have filed for bankruptcy since the beginning of 2015.

Total Oil Patch Bankruptcies Now Exceed $100 Billion

Is not just oil producers that have been suffering Haynes and Boone also tracks midstream and oil service company bankruptcies.

Total Oil Patch Bankruptcies Now Exceed $100 Billion

Haynes and Boone’s Midstream Report includes details on the midstream companies that have filed for bankruptcy since 2015. While bankruptcies in the midstream space are only around a quarter of those in the production space, they are still meaningful especially considering the industry was believed to be relatively defensive heading into the downturn.

As of September 14, 2016, 13 midstream companies have filed Chapter 11 bankruptcy in the United States since 2015 listing a total $17.2 billion in cumulative secured and unsecured debt including debt of related affiliates.

Midstream bankruptcy filings spiked during the second quarter of this year. The end of the first quarter, Haynes and Boone recorded an aggregate total of $6 billion in cumulative secured and unsecured bankruptcy debt. By the end of the second quarter, the total has spiked to $17.2 billion. The bulk of this is linked to just one bankruptcy, that of Linn Midstream, LLC, which collapsed owing just over $6 billion to creditors split equally between secured and unsecured debt. Beaver Creek Pipeline added another $3 billion to the total and Cei Pipeline, LLC collapsed owing to billion dollars in unsecured debt.

The midstream space has, to date, suffered more than the oil services sector. According to Haynes And Boone, LLP Oilfield Services Bankruptcy Tracker, which was published at the end of September, since the beginning of 2015, there have been 100 bankruptcy filings in the space with a cumulative unsecured and secured debt of $14 billion. The average debt of these cases exceeds $114 million, so in comparison to midstream and upstream bankruptcies, bankruptcies in the service space have been limited to smaller companies. That said, there are some exceptions. The largest reported bankruptcy cases involve total debt of approximately $2.7 billion (Vantage), $2.5 billion (Paragon Offshore), $1.7 billion (Seventy Energy), $1.3 billion (Hercules Offshore) and $1.3 billion (C&J).