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Oil bankruptcies rise in the third quarter

© BloombergEquinor Rosneft
A worker passes an illuminated oil drilling rig and drill pipes, operated by Rosneft PJSC, in the Samotlor oilfield near Nizhnevartovsk, Russia, on Tuesday, March 21, 2017.

The number of bankruptcies in the energy sector rose during the third quarter as the coronavirus pandemic continued to take its toll on the oil and gas industry.

Forty-four oil production and oil-field service companies filed for Chapter 11 bankruptcy between August and October, up from 29 bankruptcies during the previous three-month period. There were 17 oil producers and 27 oil field services companies that sought bankruptcy protection during the third quarter, according to Haynes and Boone.

“Combined with the general lack of access to capital, additional filings are likely before 2020 comes to a close,” the Dallas law firm said in its latest bankruptcy report.

A new wave of bankruptcies is sweeping the oil and gas industry after the coronavirus pandemic crushed global demand for crude and petroleum products such as gasoline and jet fuel. Unlike past downturns, oil and gas companies are under increased financial pressure after many investors pulled out of the sector in 2018 after years of underperformance.

Houston-based Fieldwood Energy, The Woodlands-based Arena Energy and Chaparral Energy of Oklahoma City — oil and gas producers operating in the Gulf of Mexico — were among the latest companies to file for Chapter 11 in recent months. Several energy companies said they were forced to file for bankruptcy after lenders pulled credit lines as revenue dried up.

Rystad, a Norwegian energy research firm, warned that it expects another 15 to 21 exploration and production companies may file for bankruptcy by the end of the year.  Although crude prices have climbed back to around $40 a barrel, recovery remains tenuous as coronavirus cases spike anew around the globe and continue to depress economies and crude demand.

Since the previous oil bust that ended in 2016, more than 500 oil production and oil-field services companies have filed for bankruptcy, bringing more than $279 billion of debt to court, Haynes and Boone said.

This article first appeared on the Houston Chronicle – an Energy Voice content partner. For more from the Houston Chronicle click here.

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