Oil & Gas And Oilfield Service Company Bankruptcies Climb
“Haynes and Boone released its oil patch bankruptcy reports last week. It shows exactly what we and they knew would happen, which was an increase in the number of filings and debt involved. ”
Lawyers at Haynes and Boone released their updated E&P and Oilfield Service company bankruptcy totals through the second quarter of 2020. As expected, the number of companies and the amount of debt involved in the bankruptcies increased over the filings in 1Q 2020. We have updated our charts showing the annual number of companies and debt, broken down between secured and unsecured debt. The year-to-date totals for 2020 are for half a year. Due to the anticipated surge in bankruptcy filings, Haynes and Boone announced earlier that it plans to update its reports monthly rather than quarterly.
Exhibit 25. 2020 E&P Bankruptcy Debt Passes 2019 Source: Hanes and Boone, PPHB
2020 E&P Bankruptcy Debt Passes 2019
In the E&P sector, while the number of companies filing so far this year is slightly more than half the number for all of 2019, the total debt involved has exceeded last year. The primary reason for this increase was the Chesapeake Energy Corporation. filing with $9.2 billion of debt, adding to Ultra Petroleum’s $5.6 billion and Unit Corporation’s $4.8 billion. For the month of June, five companies filed bankruptcy representing $13.4 billion of total debt, compared to the 13 companies and $15.7 billion that filed during April and May.
Exhibit 26. Debt Of OFS Bankruptcies Gaining On Peak Source: Haynes and Boone, PPHB
Debt Of OFS Bankruptcies Gaining On Peak
While only 18 companies filed bankruptcy in the oilfield service industry so far this year, the $24.9 billion of debt involved is rapidly gaining on the total 2017 debt, the most recent peak year. June had nearly as many bankruptcies as April and May combined (5 vs. 6). However, only $425 million of debt was involved in the June filings compared to $12.6 billion for the April and May bankruptcies. As oilfield activity remains low, the probability is that the number and dollars involved in oilfield service company bankruptcies will grow during the second half of this year. This is the unfortunate aspect of the oil downturn, as companies are forced to restructure costing the jobs of employees.