From Kicking the Can to Kicking the Bucket | Russell T. Rudy Energy LLC
“Rigzone” reports that a study by accounting and consulting firm, Deloitte, found that out of 500 publicly traded oil and gas exploration and production companies, roughly 175 were at risk of bankruptcy. Falling prices have necessitated budget cuts and thousands of layoffs, but this will still not be enough for some operators.
The oil and gas price collapse has also reduced the amount of cash generated by asset sales and stock offerings. However, debt seems to be the determining factor when it comes to long term prospects for survival. The companies identified at greatest risk of bankruptcy have over $150 billion in debt. Unfortunately, the cost of servicing this debt does not diminish with falling oil prices.
According to William Snyder, head of corporate restructuring at Deloitte, “These companies have kicked the can down the road as long as they can and now they’re in danger of kicking the bucket. It’s all about liquidity.”
Citing the immediacy of the crisis, Deloitte vice chairman, John England, noted “2016 is the year of hard decisions, where it will all come to a head.”
One relatively bright spot identified in the study was that energy service companies tend to be doing better. Deloitte found that of the 53 U. S. energy companies that filed for bankruptcy in 2015, only 14 were service providers. However, this is most likely because service companies are not as capital- intensive as oil and gas operators, and consequently less likely to be as burdened with debt.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=143063&utm .
