• 3 hours UK On Track To Approve Construction of “Mini” Nuclear Reactors
  • 7 hours LNG Glut To Continue Into 2020s, IEA Says
  • 9 hours Oil Nears $52 With Record OPEC Deal Compliance
  • 12 hours Saudi Aramco CEO Affirms IPO On Track For H2 2018
  • 14 hours Canadia Ltd. Returns To Sudan For First Time Since Oil Price Crash
  • 15 hours Syrian Rebel Group Takes Over Oil Field From IS
  • 3 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 3 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 3 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 days Schlumberger Warns Of Moderating Investment In North America
  • 3 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 3 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 3 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 4 days New Video Game Targets Oil Infrastructure
  • 4 days Shell Restarts Bonny Light Exports
  • 4 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 4 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 4 days British Utility Companies Brace For Major Reforms
  • 4 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 4 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 4 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 4 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 5 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 5 days Rosneft Signs $400M Deal With Kurdistan
  • 5 days Kinder Morgan Warns About Trans Mountain Delays
  • 5 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 5 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 5 days Russia, Saudis Team Up To Boost Fracking Tech
  • 6 days Conflicting News Spurs Doubt On Aramco IPO
  • 6 days Exxon Starts Production At New Refinery In Texas
  • 6 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 6 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 6 days China To Take 5% Of Rosneft’s Output In New Deal
  • 6 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 6 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 7 days VW Fails To Secure Critical Commodity For EVs
  • 7 days Enbridge Pipeline Expansion Finally Approved
  • 7 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 7 days OPEC Oil Deal Compliance Falls To 86%
Alt Text

With A World Awash In Oil, Kazakhstan Faces Fuel Crisis

Kazakhstan is struggling with a…

Alt Text

The New Challenger To Lithium Batteries

The lithium-ion battery is head…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Bankruptcies In Oilfield Services Are Accelerating

Oilfield services

Clouds have been clearing for oil producers in the U.S. oil patch, but it looks like things are a bit different in oil field services. In fact, they’re quite a bit different: according to a recent Haynes & Boone analysis, bankruptcies in the oil field services sector have boomed from about 20 last September to as much as 100 as of last month. In October, eight oil field service providers filed for Chapter 11 restructuring.

Also, according to Haynes & Boone, the total cumulative debt of U.S. oil field service providers reached US$14 billion as of this September.

In absolute terms, the number of bankruptcies among E&Ps and their combined debt is higher than the figures for oil field service providers. The bankruptcy filings in the two sectors are almost equal, but in production, the rate of new filings has slowed down considerably in the last few months, while in oil field services it has accelerated.

Debt levels for E&Ps are also higher, considerably, at a total of around US$68 billion. This, however, doesn’t seem to bother many of them as they bask in higher international oil prices and continue to add new drilling rigs. Two weeks ago, the active rig count marked its eight week of increases in a row, with as many as 11 new additions.

This should be wonderful news for oil field services, but it looks like the news is coming too late.

Like E&Ps, oil field service companies had been borrowing heavily while the going was good; when prices crashed, the debt burden started to get unmanageable, and fast. What proved to be the main problem for players in this sector were the discounts to their services they were forced to make to stay in business, and the shorter contracts they had to agree to with E&Ps.

This has benefited producers, allowing them to save quite a lot of money on drilling and maintenance services, and allowed them to boast “efficiency improvements”, but it has been deadly for many service providers. What’s more, according to a Wood Mackenzie analysis reported by the Wall Street Journal, many of the E&Ps that filed for bankruptcy over the last year and a half have continued to pump crude at the same rates they did before their Chapter 11 filing. In other words, it has been business as usual for them, apart from the debt restructuring that’s provided them with some much-needed breathing room. Related: Oil Jumps After EIA Reports Draw To U.S. Crude Stocks

This magic trick is much harder for oil field service providers to pull off, which may be a big part of the reason they have fared poorer than their upstream business partners.

The last oil field service company to file for bankruptcy was Basic Energy Services, a Texas-based company with debt of US$1.2 billion and assets worth US$1.1 billion. The company had issued a prior warning that it would be unable to survive if it could not find a way to restructure its debt and reduce its load.

The leaders of the pack—Baker Hughes, Halliburton, and Schlumberger—have been doing better, but only with massive cost cutting, major discounts for their services, and thousands of layoffs. If the rate of bankruptcies continues in oil field services, it’s likely that only the bigger players will remain, and this may come back to haunt E&Ps when prices improve more, which is bound to happen¬—eventually. E&Ps will then likely have to pay through the nose for what they now get from service providers for the industry equivalent of small change.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Kr55 on October 26 2016 said:
    Service providers should be very unhappy seeing any producers bragging about making profits at these oil prices, and boasting about how their cost savings by squeezing services are a permanent thing. Time for service providers to start demanding their fair share, or there will just be no one left to do the work.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News