New Bankruptcies | Russell T. Rudy Energy LLC
According to a recent article in “World Oil”, it appears that oil’s recent surge past $45 per barrel is too little, too late for many oil and gas companies. Since the start of 2015, 130 North American operators and service companies have filed for bankruptcy owing almost $44 billion. In addition to these, Chaparral Energy, Penn Virginia and Linn Energy filed last week.
Some industry observers opine that at least four more companies, owing a total of $8 billion are nearing default. This supposedly includes Breitburn Energy and SandRidge Energy. Many highly leveraged companies find themselves in dire straits as it is almost impossible for them to raise capital. The high yield bond market is drying up for imperiled operators, banks are cutting their credit lines, and asset sales are slowing.
W&T Offshore is another at-risk company, having overdrawn its credit line. Connacher Oil and Gas is also rumored to be preparing to file for bankruptcy.
Subash Chandra, with Guggenheim Securities, observes that while $45 oil is not the salvation for some companies, some of the better operators with production in North Dakota’s Bakken shale, the Permian Basin of West Texas, or the SCOOP and STACK prospects in Oklahoma are profitable at $50. However, he cautions that as prices firm, service companies raise their prices, and incremental production is brought on line, which could drive prices back down.
Spencer Cutter, with Bloomberg Intelligence, relates that while some operators boast profitability at $35 per barrel, they are basing their analysis only on drilling costs and ignoring overhead, salaries, and interest which can add another $10-15 per barrel of expenses. He concludes, “The short answer is $45/bbl doesn’t save anybody. Anyone who was going bankrupt at $30 is still going bankrupt at $45. You need to see oil sustained at $60 to $65 before you see a real turnaround in profitability for the sector.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/5/13/oil-at-45-proving-no-savior-as-bankruptcies-pile-up .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
