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Linn Energy and Penn Virginian Corp. joined the ranks of bankrupted energy companies, both filing for Chapter 11 bankruptcy as perpetual low oil prices continue to take their toll on independent shale producers.
Penn Virginia Corp.—a Pennsylvania E&P company—filed for chapter 11 bankruptcy on Thursday, said it had reached agreements with debt holders for US$1.03 billion in debt, which represents 87 percent of its total debt, to restructure under chapter 11 protection.
Also on Thursday, Linn Energy LLC filed for chapter 11 bankruptcy, reaching a deal with lenders to restructure US$8.3 billion in debt. The company will also obtain $2.2 billion in new financing. For Linn, the lenders of 66 percent of its debt holdings have agreed to restructuring.
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The restructuring deal calls for Linn to spin off Berry Petroleum, which it acquired for US$4.3 billion in 2013. This is the deal that turned Linn into one of the largest independent producers in the U.S.
“After our review of the available options, with the assistance of our financial and legal advisors, we determined that this court supervised financial restructuring process is the best course of action for the Company and our stakeholders,” Linn Energy chairman, president and CEO Mark Ellis said in a statement.
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"Like many others in our industry, Linn has been impacted by continued low commodity prices,” he said.
For the first four months of this year, the number of energy company bankruptcies is double what it was for the entire year of 2015, according to data from Haynes and Boone cited by Zerohedge. Total defaults have risen to U.S. $34 billion this year. For 2015, total defaults were U.S. $17 billion.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com