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The pace of bankruptcy filings by North American exploration and production companies has slowed down dramatically so far this year compared to last year, according to the latest Oil Patch Bankruptcy Monitor by law firm Haynes & Boone.
With data updated as of July 31, 2017, fourteen producers had filed for bankruptcy in 2017, representing some US$5.1 billion in cumulative secured and unsecured debt, Haynes & Boone has estimated.
This compares to 45 E&P companies filing for bankruptcy in the period January-May 2016 alone, according to the monitor.
Referring to this year’s figures, the law firm said in its report:
"E&P bankruptcy filings have continued to dwindle over the summer. While five E&P companies with cumulative debt of $77 million filed for bankruptcy in June, there were no E&P company bankruptcy filings during the months of May or July.”
Since the beginning of 2015, a total of 128 North American oil and gas producers that have filed for bankruptcy, including Chapter 7, Chapter 11, Chapter 15, and Canadian cases. All those bankruptcies involve around US$79.3 billion in cumulative secured and unsecured debt, according to Haynes & Boone.
“Many companies that needed to restructure either have gone through bankruptcy or reached out-of-court settlements with creditors,” Ian Peck, a partner at Haynes & Boone, said, as quoted by the Houston Chronicle.
However, the lower-for-longer prices may lead to an uptick in bankruptcy filings in the near term, according to Peck.
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“Despite the industry’s new stability at this price point, a prolonged pricing trough may ultimately be too difficult for some players to bear,” he said.
A number of U.S. drillers expect to continue raising production this year, but some are adjusting spending to the expected cash flows in the current oil price environment, after prices failed to rise as much as analysts and investors had expected a few months ago.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.