The Great American Oil & Gas Massacre: Bankruptcies Hit New Milestone as Bigger Companies Let Go

The Great American Oil & Gas Massacre: Bankruptcies Hit New Milestone as Bigger Companies Let Go

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The American Oil Boom Was Where Money Went to Die.

By Wolf Richter for WOLF STREET.

The amount of secured and unsecured debts, such as 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, according to data compiled by law firm Haynes and Boone. And this nine-month total already surpassed the full-year total of oil-bust year 2016.

These 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. The companies involved in fracking couldn’t even generate positive cash flows at $100 a barrel. And as prices plunged, all heck broke loose. Creditors and equity investors, after drinking the Kool-Aid for years, suddenly got scared, and new money dried up to service the old money. A slew of bankruptcies ensued among the smaller players, reaching a high in 2016. And people thought that was it, the oil bust was over, and new money started pouring back into the sector.

But then came Phase 2 of the Great American Oil-and-Gas Bust in late-2018, with the price of WTI in the futures market eventually collapsing briefly to minus $37 a barrel in April 2020. In recent weeks, WTI has been hovering around $40 a barrel, at which the US oil industry is still burning millions of barrels of cash per day, so to speak:

The total number of oil-and-gas bankruptcies so far this year, at 88 filings, remains a lot lower than the 141 filings in 2016. Back then, scores of small companies were shaken out. Now the bigger ones with multi-billion-dollar debts are letting go as the crisis is working up the ladder.

In the third quarter, the oil-and-gas companies with the most listed debts to file for bankruptcy were:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.