American Oil & Gas Massacre Bankruptcies Continue

For years, the industry, as a whole, has been cash-burn machine that needed new investor cash to stay alive. Some companies are exceptions, but generally when new money stopped fueling operations and debt service of the old money, these cash-burn machines had to go bankrupt. The overall U.S.  fracking industry was a Ponzi scheme for most investors -- burning  their cash and leaving stockholders with too much debt.

Cumulative debts disclosed by 490 US oil and gas companies, in their bankruptcy filings from January 2015 through September 2020, has now jumped to almost $300 billion.

The 12 largest oil-and-gas bankruptcy filers so far this year are typically involved in fracking, such as fracking pioneer Chesapeake. Others are involved in offshore drilling, such as McDermott and Diamond.  Denbury specializes in enhanced recovery of oil from older oil fields:

In third quarter 2020, the oil-and-gas companies with the most listed debts that filed for bankruptcy were:
   California Resources: $6.3 billion
          Nobel Corporation: $3.9 billion.
                     Hi-Crush Inc. $3.8 billion
           Chaparral Energy: $3.5 billion
       Denbury Resources: $2.5 billion
              Oasis Petroleum: $2.3 billion

Oil and gas companies now have less access to bank loans.  Companies with bonds outstanding face upcoming bond maturities. They need new money to pay off the old money. But investors are not interested in buying new oil and gas stocks and bonds.

The amount of secured and unsecured loans and bonds, listed in bankruptcy filings in the third quarter by US oil and gas companies, at $34 billion, pushed the total oil-and-gas bankruptcy debt for 2020 to $89 billion, (Data compiled by law firm Haynes and Boone). And this $89 billion nine-month total already exceeded the 2016 full-year total -- the prior oil-bust record year.

The total number of oil-and-gas bankruptcies so far this year (88 filings), is a a lot lower than the 141 filings in 2016, when many small companies went bankrupt.  In 2020 they are predominately exploration and production companies (E&P) and oilfield services companies (OFS) but also include some “midstream” companies (they gather, transport, process, and store oil and natural gas).

In mid-2014, the price of crude-oil benchmark WTI, which had been over $100 a barrel, started plunging. Creditors and equity investors, got scared, and new money dried up to service the old money. Bankruptcies among the smaller companies peaked in 2016. Then new money started pouring back into the sector. In late-2018, the price of WTI in the futures market began a decline that briefly reached minus $37 a barrel in April 2020 .. about $40 a barrel recently.

Texas, the largest oil producing state, is also the largest oil-and-gas bankruptcy state, with 269 oil-and-gas companies filing since 2015, 55% of the 490 total US filings.  Delaware is the second for oil-and-gas bankruptcy filings on;y because it has a favorable laws for corporations that incorporate there even though their actual headquarters are in other states.