Building out the Bakken and other oil patches in the country took huge amounts of capital, and led many oilfield companies to take on huge debts.
Many of these survived the downturn, but now face a new threat. Vanishing access to capital, even as all their debts begin to come due.
The S & P lists some $146 billion in debts for oil and gas that will reach maturity in the next four years or so — $9 billion of that in 2019 alone.
Meanwhile, investor cynicism has curtailed the industry’s normal routes to capital. The new “live-within-your-means” mantra already appears to be fueling an uptick in oilfield bankruptcies.
The Haynes and Boone’s Oil Patch Bankruptcy Monitor began tracking oilfield bankruptcies in 2015. According to it, there’s been a clear uptick in filings for exploration and production companies in 2019, even though the year is not yet over.
“For certain financially troubled producers wounded by the crash in 2015, some stakeholders may have given up hope that resurgent commodity prices will bail everyone out,” according to the Haynes & Boone Oil Patch Bankruptcy Monitor. “For these producers, the game clock has run out of time to keep playing ‘kick the can’ with their creditors and other stakeholders.”
Haynes and Boone list 26 filings through August in the nation’s oil patches. That figure is greater than all of 2017, and is already nearly as many bankruptcies as in 2018.
Among the 2019 bankruptcy filings was Triangle Petroleum, an independent energy company with operations focused in North Dakota and Montana.
Triangle filed for bankruptcy in Delaware on May 2019, listing aggregate debts of $169.3 million. The bulk of that was owed to JPMorgan Chase Bank and J.P. Morgan Securities.
In its court filing, the company said J.P. Morgan Securities was not willing to extend forbearance, which was set to expire on May 19.
Triangle’s two subsidiaries were not part of the bankruptcy filing in May. Those include its profitable Bakken Real Estate Development LLC and a large joint venture stake in Caliber Midstream Holdings, a pipeline and oil and gas gathering operation in North Dakota.
This was actually Triangle’s second brush with bankruptcy. Subsidiaries Triangle USA Petroleum Corporation and Ranger Fabrication filed for Chapter 11 in 2016. The companies emerged from that under the control of bondholders, which included J.P. Morgan Securities.
Halcon Resources Corporation is another of the bankruptcy filings in 2019 that will sound familiar in the Bakken. While the company is now focused on the Permian, it did have holdings in the Bakken during the boom. These were sold to Bruin for $1.4 billion in 2017. Bruin is listed as running one rig in North Dakota by the state’s Division of Oil and Gas.
Halcon’s filing this year was also its second go-round with bankruptcy court. Experts blamed the second filing on an overly ambitious projection for both prices and production.
Oilfield service companies, meanwhile, have not been immune to the new capital discipline trend — although they have suffered fewer bankruptcies.
Haynes and Boone listed 22 filings for 2018 through the second quarter of 2019 for OFS companies. Ten of those were in 2019.
However, just one of the 2019 bankruptcies accounted for almost all of the $7.63 billion in aggregate debts listed for the companies in the Haynes and Boone report.
That was Weatherford, another well-known Bakken company. It filed for bankruptcy in Texas in July, listing $7.43 billion in unsecured debt.