Lonestar Resources has filed for Chapter 11 relief in U.S. Bankruptcy Court for the Southern District of Texas because a growing number of U.S. oil and gas producers – from small players to giants – are in the struggling with debts they cannot pay off with such low oil prices.
This week, Oasis Petroleum Inc. also called for a voluntary Chapter 11 restructuring process that is expected to reduce its debt by US $ 1.8 billion. Oasis Petroleum has sufficient liquidity to maintain operations and plans to exit the restructuring process in November 2020, subject to court approval, the company said.
Dozens of shale producers have already filed for bankruptcy this year, with Chapter 11 filings accelerating after the oil price collapse in March and U.S. shale producers cutting production in the U.S. following months.
Notable bankruptcies included Permian producer Rosehill Resources, California Resources and Denbury Resources. Shale giant Chesapeake Energy also filed for bankruptcy at the end of June.
According to data from law firm Haynes and Boone as of August 31, a total of 13 producers applied for protection in July and August, which, combined with the rest of the filings this year, is a 62% increase from the same period last year. .
“It is not quite the level of deposits reached in 2016 but a worrying trend nonetheless. Interestingly, the total secured debt involved in producer bankruptcies in 2020 to date already exceeds the total amount of secured debt for all producer deposits in 2016, ”said Haynes and Boone.
“Until full economic activity returns and consumers trust that the worst of the pandemic is behind us, demand levels will remain depressed. “Lower, longer” remains the watchword for producers and their creditors, ”the law firm said.
By Josh Owens for Oil Octobers
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