Sundance Energy filed for bankruptcy this week, seeking court protection from its lenders after receiving two federal bailouts, laying off workers, and approving millions in executive bonuses.
The Denver-based oil and gas producer also reported a brief spike in the number of people it employs when obtaining one of those bailouts, raising questions about the integrity of data it provided to the government. The loan in question, a $1.9 million forgivable payment from the Small Business Administration’s Paycheck Protection Program, was based in part on Sundance’s claim that it had 128 employees as of April 2020. At the time, U.S. crude production had slowed to a crawl as oil prices hit new lows.
Sundance in June disclosed receiving a $1.2 million refund as a result of changes made in the CARES Act, a stimulus law aimed at easing the impact of the pandemic. The changes allow money-losing companies to benefit from past years’ losses. Sundance was among several dozen oil and gas companies that received multiple bailout benefits.
While the CARES Act aimed to “preserve jobs for American industries”, many in the oil and gas industry continued with cost-cutting measures that included layoffs, as Sundance apparently has.
The company’s board of directors, which includes CEO Eric McCrady, also sought to pay executives bonuses shortly before filing for bankruptcy. The board approved $1.9 million in bonuses to five executives in December. Although the bonuses have not been paid, the board's approving them amid layoffs and bankruptcy underscore an impropriety common in the fossil fuel industry.
Sundance has struggled for years against volatile commodity prices, but received its bailout millions under the banner of pandemic relief. In the court filings, Chief Financial Officer explained, “The combination of the COVID-19 pandemic and a downward trajectory in the market price of crude oil and natural gas both prior to and after the beginning of the pandemic” caused the company’s failure. The prepackaged bankruptcy plan will eliminate over $250 million in debt by swapping lenders’ debt for stock and wiping out current shareholders.
For more on bankruptcies, layoffs and executive compensation, read our recent analysis.