Bankruptcies in oil, gas soar in second quarter
Eighteen oil and gas companies filed for bankruptcy in the second quarter, the most in a single quarter since the bottom of the last oil bust, according to a new report.
Chesapeake Energy, Ultra Petroleum, Unit Corp. and Whiting Petroleum were among the largest energy bankruptcies in the quarter, according to Haynes and Boone, a Dallas law firm that has tracked North American energy bankruptcies since 2015.
The number of bankruptcies in the quarter was the most since 34 energy companies filed in the second quarter of 2016, shortly after crude prices bottomed out near $26 a barrel in February 2016, during the oil crash that began in mid-2014.
Energy bankruptcies during the second quarter this year jumped more than threefold from the first quarter, when five oil and gas companies filed. So far
this year, 23 energy companies have filed, bringing a combined $30.6 billion of debt to court.
The number of oil patch bankruptcies was starting to grow last year after capital markets soured on the energy sector and pulled back investments. The twin shocks of the coronavirus pandemic and the short-lived production war between Saudi Arabia and Russia plunged crude prices to a record low negative-$37 a barrel in April, accelerating the pace of bankruptcies.
Although energy prices have rebounded to about $40, Haynes and Boone said it expects energy bankruptcies to continue in the coming months, especially as several countries, including the U.S., see new spikes in coronavirus cases.
“Until full economic activity returns and consumer confidence that the worst of the pandemic is behind us, demand levels will not pull up prices,” Haynes and Boone said. “It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy, even if oil prices recover over the next few months.”
Since the last oil bust ended in 2016, 231 oil and gas producers have filed for bankruptcy, bringing more than $152 billion in debt to court, the law firm said.