Bankruptcy filings for North American exploration and production (E&P) companies have fallen significantly in 2021 compared to 2020, so much so that Haynes and Boone LLP is calling for an end to the bankruptcy cycle that began during the downturn of the 2015 oil market.
The law firm has been tracking those filings ever since, through its Oil Patch Bankruptcy Monitor report.
The latest report, updated Jan. 31, found aggregate debt for producers who filed for bankruptcy in 2021 stood at $2.1 billion, the lowest annual amount since Haynes Boone began trading. to follow. The highest annual total was $56.8 billion, recorded in 2016.
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“In truth, we did not expect to follow oil and gas bankruptcies for so long, but the unprecedented and sustained level of filing activity since 2015 – involving a total of over $321 billion in secured and unsecured debt – required our continued vigilance,” said Haynes Boone Partner Buddy Clark. âFortunately, the tidal wave of filings has finally subsided to a point where we can put bankruptcy reports to rest.
“We call for the end of this cycle but, as history is our guide, there will be another cycle,” the firm said.
Twenty producers filed for bankruptcy in 2021, down from an annual average of 39 since 2015 and a peak of 70 filings in 2016, the Haynes Boone researchers said, noting that Texas accounted for more than half of last year’s filings. .
The decline in filings in 2021 coincided with a recovery in commodity prices from a severe pandemic-induced downturn in 2020. North American E&P also continues to significantly improve operational efficiency and has focused on shareholder returns rather than maximizing output.
The bankruptcies of the oil services (OFS) also fell precipitously.
âThe aggregate debt of OFS companies that filed in 2021 is $10.6 billion,â consisting primarily of Seadrill Ltd. and Basic Energy Services Inc., which accounted for $9.1 billion of the total,” researchers said. This figure is down from the overall total of $45.1 billion for OFS companies in 2020.
Haynes Boone saw 36 filings by OFS companies last year, compared to an annual average of 42 since 2015.
Midstream companies followed a similar trend, with four companies filing in 2021 with total total debt of $8.3 million, the lowest total since Haynes and Boone began reporting. The highest annual total was $12.8 billion recorded in 2016.
Over the past seven years, the company has tracked 274 producer bankruptcies, as well as 330 filed by oil services and intermediary companies. That brings the combined North American industry total to more than 600 industrial bankruptcies involving more than $321 billion in secured and unsecured debt, researchers said.
“When we began our report in early 2015, it was clear that our industry was about to enter rough seas in the face of headwinds,” the researchers said. âOPEC had declared its intention to take back market share from the prolific American shale producers over the Thanksgiving weekend in 2014, and prices fell precipitously in early 2015.â
The team added: âWe expected to see some bankruptcy activity for some time and have started tracking bankruptcy filings by producers and oil service companies. We did not expect to see so many bankruptcies for so long.
The researchers said that “while there will still be bankruptcies in the oil sector, the tidal wave triggered by the price correction that began in late 2014 is over.” Haynes Boone will continue to release its semi-annual survey of borrowing base revaluations and its survey of power bank prices, but the bankruptcy report will be put on the back burner for now.