Whiting Petroleum Corp., facing a debt maturity of more than a quarter of a billion dollars, filed for bankruptcy on Wednesday, perhaps the most illustrious of shale explorers so far humiliated by a ruthless rout in all corners of the petroleum industry.
American crude has lost two-thirds of its value this year and has just closed its worst quarterly performance. According to Paul Sankey, analyst at Mizuho Securites USA LLC, up to 70% of the country’s 6,000 oil explorers could eventually sink, as the Covid-19 twin hits and a Russo-Saudi price war destroy producers like Whiting.
Formerly the largest oil producer in the Dakken Oil Shale region of North Dakota, Whiting has lost money in four of the past five years and has gone deeper into debt as the COVID epidemic -19 crushed energy demand. The primacy of the company over Bakken won him little praise, as the region had already fallen into disgrace as drillers turned to lower-cost prospects in the Permian basin.
Hailed as one of the “returning children” of the American shale by Canaccord Genuity in late 2015, Whiting said on Wednesday that she had agreed to hand over most of her property to ticket holders in exchange for erasing more $ 2.2 billion in debt, according to a press release.
US $ 262 million due
Asset manager Pickering Energy Partners LP says as many as 40% of US oil and gas companies could be bankrupt or distressed over the next two years as they grapple with a market crash and epidemic of coronavirus.
Shale drillers were not the only subsector affected by the accident. Hornbeck Offshore Services Inc., which specializes in transporting equipment to offshore drilling sites and production platforms, revealed on Wednesday that it is negotiating a plan with creditors to ease the debt burden by 1.2 billion US dollars. The company plans to file a Chapter 11 filing.
Denver-based Whiting faced the $ 262 million maturity of convertible notes on Wednesday. Whiting filed for Chapter 11 protection from creditors in the South Texas district, listing US $ 3.6 billion in debt and US $ 7.6 billion in assets in its application bankrupt.
Even before the viral pandemic brought crude prices to their lowest level in almost two decades, Whiting struggled and never fully recovered from the last stock market crash of 2014-2016. In December 2015, when crude oil prices were only a few weeks from their trough to reach their lowest level in 13 years, Canaccord analyst Stephen Berman ranked Whiting among a group of “young people in potential ‘return to the American shale industry.
US $ 20 Oil
When former Anadarko Petroleum Corp. chief Brad Holly took over as chief of Whiting in late 2017, oil prices rose and at one point hit $ 75 a barrel. But debt remained stubbornly high, prompting Holly to lay off a third of its workforce last year and cut production targets after posting an unexpected quarterly loss.
Oil is now trading around US $ 20 per barrel, well below the US $ 50 level that David Deckelbaum, analyst at Cowen Inc., estimates that Whiting needs to stay afloat. The company, which had a market capitalization of 11 billion U.S. dollars in 2014, was valued at around 62 million U.S. dollars on Tuesday. Whiting’s bankruptcy case followed that of shale drillers Alta Mesa Resources Inc. and Sanchez Energy Corp., who sought protection last year.
Moelis & Co. is the financial advisor to Whiting, while Kirkland & Ellis LLP is its legal advisor and Alvarez & Marsal is its restructuring advisor.
The case is Whiting Petroleum Corporation, 20-32021, US Bankruptcy Court for the Southern District.