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In a sign things for the oil industry in Canada’s oil industry are improving, albeit slowly, bankruptcies in the industry last year declined by as much as 50 percent compared with 2017, data from the Office of the Superintendant of Bankruptcy showed.
Only 15 bankruptcies took place in Canada’s oil and gas extraction sector, versus 30 a year earlier as prices continued to recover from the 2014 collapse despite specific challenges hat still remain, mainly pipeline capacity shortages and costly railway transport of crude.
Yet the situation with oil prices was not the only one that drove the substantial decline in bankruptcies, the Calgary Herald reports. The daily quoted David Lewis, member of the Canadian Association of Insolvency and Restructuring Professionals as saying some bakruptcies may have been simply delayed in anticipation of an important ruling by the Supreme Court.
The ruling was on a case involving a bankrupt oil company Redwater Energy, and had to prescribe whose responsibility it is to clean up inactive oil wells. The ruling came out in January, with the Court taking the side of the Alberta government and the Alberta Energy Regulator, which argued this responsibility lay with the bankrupt company’s trustee.
“Either the companies or their main creditors may have been holding off on doing anything, because until a decision on Redwater was made on whether you had to do a cleanup or not, it made a big difference on what they may receive as a payout,” the expert said.
Despite the improving performance of oil companies, the situation in the overall economy of Alberta remains rather dire, with individual insolvencies in the oil province rising last year by a tenth from 2017.
Unemployment rates remain high and Alberta has the highest debt per capita, according to Lewis. This suggests one of the biggest employers in the province still cannot afford to expand its workforce to pre-crisis levels, regardless of improving oil prices.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.