So far, oil bankruptcies have increased by 66 percent in 2020 compared to last year, and producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months.
In their latest monitoring report, Hayes & Boone LLP updates the number of oil producers that have filed bankruptcy since 2015 and examines the impacts and implications of the pandemic and economic fallout in 2020.
Haynes & Boone notes that July 2020 saw two of the largest filings involving well-established oil companies - California Resources Corporation (CRC) and Denbury Resources, Inc. Together, CRC and Denbury account for over $7.7 billion in aggregate secured and unsecured debt. In total, nine producers filed for bankruptcy in July, which, combined with the rest of the filings this year, represents a 66 percent increase over this time last year.
Over the entire five-year period as of July 31, 2020, 240 producers have filed for bankruptcy since Haynes and Boone’s Oil Patch Bankruptcy Monitor began tabulating E&P filings, involving more than $171 billion in aggregate debt with over $49 billion so far in 2020.
Haynes & Boone predicts that the recent resurgence of confirmed COVID-19 cases in the U.S. and abroad makes any near term sustained demand growth unlikely to prop up world oil prices higher. Until full economic activity returns and consumer confidence that the worst of the pandemic is behind us, demand levels will remain depressed. They also expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months.
Haynes and Boone LLP is an international corporate law firm. Their lawyers have played a key role in a number of high-profile E&P, midstream, and oilfield service matters, including asset sales, refinancings, debt restructurings and Chapter 11 cases, representing debtors, creditors, energy lenders, and private equity investors.