Bankruptcies in oilfield services have increased this year as COVID-19 impacts the industry. Texas is the hardest-hit state in the third quarter of 2020, according to data provided by Haynes and Boone's Energy and Restructuring Practice Group.
Haynes and Boone's Energy and Restructuring Practice Group has been tracking oilfield services bankruptcies for the past five years. In Q3 of this year, the firm reported a total of 26 bankruptcies in North America, a 236% increase over 2019's third quarter bankruptcies. Eighteen of those bankruptcies were in Texas.
Of the reports, Haynes and Boone have prepared an Oil Patch Bankruptcy Monitor, which will show clients details on oil and gas producers filing bankruptcy since 2015, according to a Haynes and Boone press release.
The company has also released the Oilfield Services Bankruptcy Tracker report providing details on oilfield companies filing bankruptcy since 2015, the most recent being Sept. 29.
In Haynes and Boone's second report, the Oilfield Services Bankruptcy Tracker, data shows that 18 of the 26 new bankruptcy filings in the third quarter of this year are Texas-based companies.
The company has also recorded 240 oilfield services (OSF) bankruptcies from the beginning of 2015 through August 2020. Of the 240, Texas companies filed a total of 133, which makes it the state with the most bankruptcy filings for oilfield services overall in the last five years.
"The total amount of aggregate debt administered in oilfield services bankruptcies during this period is over $100 billion. From 2018 through 2019, the OFS bankruptcy filings decreased both in number (33 filings) and in aggregate debt ($11.9 billion) compared to 2017 (approximately 40 filings and aggregate debt of $35 billion)," the Oilfield Services Bankruptcy Tracker report states. "As we enter the fourth quarter of 2020, extreme financial pressure is being felt at all levels of the energy industry. Producers, gatherers and other midstream companies, refiners and marketers are abruptly adjusting to the “new normal” brought on by the COVID-19 pandemic."
Pandemic-related cutbacks are leaving many oilfield companies feeling the brunt of the damage. More than half of all oilfield services unsecured debt is located in Texas as well.
"If capital markets fail to open up for these producers to refinance their bonds, they will be heading full speed towards a debt maturity wall with no option but to file for the protection of the bankruptcy courts starting in 2021," Haynes and Boon Oil Patch Bankruptcy Monitor.
When Haynes and Boone started monitoring North American oil and gas producer bankruptcies, more than100 filings occurred in the first two years, according to the Oil Patch Bankruptcy Monitor report. The number fell by approximately half in 2017 and 2018, followed by an increase in 2019, and skyrocketing in 2020. Early in the Covid-19 Pandemic, oil prices fell from $63 per barrel to negative in a short period.
"Although prices have rebounded to around $40/bbl, market conditions heading into October remain concerning for the industry," the Oil Patch Bankruptcy Monitor report states.
