More than 215 oil and gas producers have filed for bankruptcy over the last five years involving more than $129 billion in debt, according to a report released Tuesday by Haynes and Boone.
In the first quarter, there were seven bankruptcies in the upstream sector versus nine in the fourth quarter and five in the same period last year. But with oil prices falling since January from $63 per barrel to below $20 in March, “lower for longer” may be the watchword for producers as well as their creditors, the firm said.
In oilfield services, 204 companies have filed for bankruptcy over the five-year period with more than $76 billion in debt, Haynes and Boone reported, with eight companies filing in the first quarter versus six in the previous quarter and three at the same time last year.
Conditions aren’t looking good for oilfield services providers going forward given the extreme financial pressure being felt at all levels of the energy industry given low oil prices and the uncertainty around the demand-sapping coronavirus, the firm said.
“With the immediate cutbacks in producers’ capex budgets for drilling, completions and other activities in the field, OFS [oilfield services] companies will feel the brunt of this impact,” the firm said. “But many smaller or highly leveraged companies may not be able to hold on, avoiding seeking protection in bankruptcy courts.”
Midstream companies haven’t suffered the same level of distress experienced by upstream and oilfield services companies, Haynes and Boone said, with only 30 of them filing for Chapter 11 in the U.S. since 2015 involving more than $21.9 million in secured and unsecured debt.
But two midstream providers filed in the first quarter versus two for all of last year. And Haynes and Boone noted that market turmoil affecting prices and demands will have an impact on all facets of the midstream industry “and it’s likely a number of these companies may need to seek bankruptcy protection over the remainder of 2020.”