Data show oilpatch insolvencies down while consumer bankruptcies climb
calgary The number of Albertans who filed for insolvency rose in 2018, though corporate bankruptcies in the oil and gas sector declined significantly.
According to the Office of the Superintendent of Bankruptcy, 14,700 Albertans declared personal insolvency last year, a nearly 10 per cent increase from the year before and the second highest increase among Canadian provinces after Newfoundland and Labrador.
The uptick can be attributed to the province’s unemployment rate, which remains elevated compared with pre-recession levels, as well as rising interest rates, said David Lewis, an Alberta-based board member of the Canadian Association of Insolvency and Restructuring Professionals.
“And those people who are going back to work are not necessarily getting paid the same amount as they were before. So that all causes stresses when Alberta has the record-highest debt per capita,” Lewis said. “It’s just a perfect storm.”
Corporate insolvencies were also up in Alberta in 2018, by approximately five per cent. However, the oil and gas sector specifically saw a steep decline in bankruptcies — an almost 50 per cent decrease from a year earlier.
Lewis said a wave of bankruptcies in the oil and gas sector occurred early on in the oil price-related downturn, and many of those have already worked their way through the system. However, he said another reason for the decrease in 2018 may be that companies and their creditors were waiting on a crucial Supreme Court decision.
Last month, in a 5-2 decision, the Court sided with the Alberta Energy Regulator and the provincial government, ruling that the trustee for bankrupt Redwater Energy has the responsibility to pay the environmental cleanup costs for inactive oil and gas wells.
“Either the companies or their main creditors may have been holding off on doing anything, because until a decision on Redwater was made on whether you had to do a cleanup or not, it made a big difference on what they may receive as a payout,” Lewis said.
Lewis added that for small businesses and consumers alike, the numbers may not tell the whole story. He said cases of “hidden insolvency” — where an individual or business is no longer paying the bills but has not sought debt relief options — are common.