By Liz Hampton, Reuters
Oilfield service creditors have been hit harder this year by bankruptcy court filings than during all of 2016, according to law firm Haynes and Boone, a sign of the oil industry’s uneven recovery.
Through the first seven months, U.S. oilfield service companies filed for bankruptcy owing $16.4 billion, compared with $13.5 billion in total debt for all of last year. There were 33 oilfield service bankruptcies through July, compared with 46 filings in the same period last year, according to the law firm.
While drilling activity has sharply gained among U.S. onshore producers and oil prices [CLc1] at about $48.50 are above last year’s low, they are still not high enough to lift offshore drilling activity and pricier international projects.
Deepwater drilling contractor Ocean Rig USW Inc listed debts of about $3.7 billion in its March bankruptcy filing, the largest since Haynes and Boone began tracking energy bankruptcies in 2015.
Geophysical services provider CGG (US) Holding Inc was the second-largest filing, owing creditors $3.4 billion, when it declared bankruptcy in June. “Many of the larger companies were able to do some out-of-court restructurings to weather the storm, but as depressed commodity prices continued, the market drove them into bankruptcy,” said Stephen Pezanosky, a restructuring partner with Haynes and Boone in Dallas.
Companies involved in offshore services currently dominate energy restructurings. Bankruptcy filings among companies that explore for and produce oil and gas have fallen sharply this year, with only 14 seeking court protection as of July 31, compared with 55 in the same period last year, according to the study.
No energy producers filed for bankruptcy in July, but some are anticipated to seek restructuring help in the third and fourth quarter of this year, Pezanosky said.”We’ve got a number of companies that were able to keep their heads above water in 2016, but now that commodity prices have not completely recovered, they’re having to do something, whether it’s in-court or out-of-court restructuring,” he said.
Since the start of 2015, 128 oil and gas producers have filed for bankruptcy, according to Haynes and Boone’s tally.