Few people, excluding dim witted bankers and investors, have a taste for assets which lose money. That is not really that surprising.
The pace of oil patch bankruptcies is picking up. According to a new count from Houston law firm Haynes & Boone, April saw 11 bankruptcy filings, the most of any month in the past two years. The headline failures that month were Ultra Petroleum UPL +%, which buckled under $3.9 billion in debt, and Energy XXI, which carried debt of $2.9 billion.
All told, 69 oil and gas producers with $34.3 billion in cumulative secured and unsecured debt have gone under. Since share prices peaked in 2014, the oil bust has wiped out about $1 trillion in equity, with the Dow Jones U.S. Oil & Gas Index off 40%.
There’s more to come. “Despite the modest recovery in energy prices, all indications suggest many more producer bankruptcy filings will occur during 2016,” writes Haynes & Boone. According to Deloitte , about a third of global oil and gas companies, or about 175 of them, are at risk of insolvency. Bernstein Research estimates that by 2019 we’ll see more than $70 billion in defaults amid more than $400 billion in high-yield energy debt — that would indicate that we’re only halfway through the bankruptcies.
The biggest failure of the oil bust so far has been Canadian-listed Pacific Exploration & Production, which produces heavy oil in Colombia, and entered bankruptcy with $5.3 billion in debt.
Second-biggest is Tulsa, Okla.-based Samson Resources, which K.K.R. acquired from the family of billionaire Lynn Schusterman in a 2011 LBO for $7.2 billion, including more than $4 billion in debt. In its bankruptcy filings, Samson estimated its value at $1.5 billion.
What’s striking is how little the creditors of some of these bankrupt firms are getting in liquidation. Quicksilver Resources filed Chapter 11 with $2.1 billion in debt. Its assets, in the Barnett shale and west Texas, eventually sold for just $245 million in cash.
Meanwhile, Dune Energy only got $20 million for its oil and gas fields in Texas and Louisiana, against $144 million in debt. BPZ Resources, which operates in Peru had $275 million in debt; its assets sold for only $9 million.
Here, according to Haynes & Boone’s Oil Patch Bankruptcy Monitor, are the 15 biggest bankruptcies (so far).
Pacific Exploration & Production – $5.3 billion in debt
Samson Resources – $4.3 billion
Ultra Petroleum – $3.9 billion
Sabine Oil & Gas – $2.9 billion
Energy XXI – $2.8 billion
Quicksilver Resources – $2.1 billion
Midstates Petroleum – $2 billion
Venoco – $1.3 billion
Swift Energy – $1.2 billion
Energy & Exploration Partners – $1.2 billion
Magnum Hunter Resources – $1.1 billion
Milagro Oil & Gas – $1 billion
New Gulf Resources – $600 million
Goodrich GR +% Petroleum – $500 million
ERG Resources – $400 million
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