Page 4 - NorthAmOil Week 14

NorthAmOil COMMENTARY NorthAmOil
Whiting becomes first bankruptcy of latest oil price crash
Shale producer Whiting Petroleum has filed for bankruptcy protection in the wake of the oil price collapse, and many others are set to follow unless prices improve
US
WHAT:
Whiting Petroleum has filed for Chapter 11 bankruptcy protection.
WHY:
The company was already struggling and the fall in oil prices pushed it into bankruptcy.
WHAT NEXT:
How many other shale drillers follow suit depends on the length of the price downturn.
WHITING Petroleum has filed for Chapter 11 bankruptcy protection, becoming the first US shale producer – and first publicly traded oil company – to fall victim to the crude price col- lapse last month. As noted in NorthAmOil Week 34, Whiting was quickly identified as one of the two shale producers most at risk as a result of the new downturn, so its bankruptcy filing comes as no surprise. Numerous other bankruptcies are predicted to follow, and this time it will likely be even more difficult for the companies involved to survive.
When, not if
Whiting’s bankruptcy filing was widely con- sidered to be a matter of time when West Texas Intermediate (WTI) prices tumbled below $35 per barrel in March following the collapse of OPEC+ talks on limiting production. Con- ditions were subsequently exacerbated by the rapid spread of the coronavirus (COVID-19), with numerous countries imposing lockdowns of varying severity in order to contain the out- break. These lockdowns have been characterised by travel restrictions and slowdowns in eco- nomic and industrial activity, with oil demand taking a major hit as a result, forcing crude prices to sink even lower. By the end of March WTI was trading below $21 per barrel, and this proved too
much for Bakken-focused Whiting.
The company announced on April 1 that it
had agreed with creditors to cut its debt by about $2.2bn through an exchange of some of its notes for 97% of new equity. Existing Whiting share- holders will own 3% of the reorganised firm once the bankruptcy process is complete.
The announcement came the day Whiting had been due to repay $262mn that was out- standing on a convertible bond. The company had begun to explore restructuring options in March and had announced various other steps it was taking in response to the oil price downturn during that month prior to entering bankruptcy protection.
In its statement, Whiting said it has over $585mn in cash on its balance sheet and expects to continue operating “without material disrup- tion to its vendors, partners or employees”. The company anticipates having sufficient liquid- ity to meet its financial obligations during the restructuring period without the need for addi- tional financing, it added.
Whiting previously said it expected to pro- duce about 42mn barrels of oil equivalent (boe) in 2020. In mid-March, shortly after the collapse in oil prices, it said it was cutting capital spending by about 30% and would drop a rig and comple- tion crew.
Source: US Energy Information Administration
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w w w . N E W S B A S E . c o m Week 14 09•April•2020