Page 13 - NorthAmOil Week 29

NorthAmOil PERFORMANCE NorthAmOil

Two more producers file

for bankruptcy protection

US THE number of oil industry bankruptcy filings If the agreement is implemented, it will
continues to rise. Last week’s announcement that reduce California Resources’ debt by over $5bn,
California Resources was filing for Chapter 11 the company said in a July 15 statement. The
bankruptcy protection was followed by news bankruptcy filing showed that the producer
this week that Bruin E&P Partners was following owed more than 50,000 creditors about $6.1bn,
suit. On the oilfield services side, meanwhile, BJ including $5bn of funded debt.
Services has also announced a bankruptcy filing. California Resources’ bankruptcy filing is
California Resources is the State of Califor- the largest since the current downturn started to
nia’s largest oil and gas producer. It was spun off be filed by a conventional producer. The other
from Occidental Petroleum in 2014 and inher- major bankruptcy filings since March have come
ited more than $6bn in debt. With the last oil from shale producers – including Whiting Petro-
price downturn also starting in 2014, the com- leum, Chesapeake Energy and Extraction Oil
pany saw its asset base diminish compared to its & Gas – with a handful of smaller players also
debt load. falling into bankruptcy. In total, 18 oil and gas
California Resources had paid down some companies filed for bankruptcy protection in the
of its debt from a peak of $6.7bn in 2015, but second quarter
was still holding about $5bn in debt at the start Joining these shale drillers now is Bruin,
of 2020, and the new downturn that started in which focuses on the Bakken and Three Forks California
March proved too much for the company. plays in North Dakota. Bruin, which is backed by
“We have consistently operated within cash private equity firm ArcLight, said it was forced to Resources’
flow, significantly reducing the outsized debt file for bankruptcy after its lenders reduced the
burden we inherited from Occidental Petroleum company’s credit line, causing it to be overdrawn bankruptcy filing
at our December 2014 spin-off. However, today’s by more than $170mn.
unprecedented market conditions, including “Despite owning and operating a valuable is the largest
oversupply and reduced demand due to [coro- portfolio of oil and gas properties, at currently since the current
navirus] COVID-19, require that we further depressed commodity prices, the debtors do
reduce our debt through a Chapter 11 process,” not have sufficient liquidity to cure the bor- downturn started
said California Resources’ president and CEO, rowing base deficiency,” Bruin said in its bank-
Todd Stevens. ruptcy filing. “The debtors’ current debt load is to be filed by
The company has entered into a restructuring unsustainable.”
support agreement with holders of around 84% According to the filing, Bruin has about $1bn a conventional
of its 2017 term loans, 51% of its 2016 term loans of debt and $11mn of cash on hand. The com- producer.
and its Elk Hills midstream joint venture partner, pany has estimated proven reserves of about
Ares Management. Under the proposed agree- 193mn barrels of oil equivalent (boe) and pro-
ment, shareholders will be wiped out and inves- duced about 37,000 boe per day in 2019.
tors holding the 2017 loan will receive 93% of the More bankruptcies are looming. Denbury
reorganised company. Lower-ranking creditors Resources missed its July debt payment, while
will share the remaining 7% if they vote in favour Chaparral Energy has asked lenders for more
of the proposal, which must be approved in a US time, setting both companies on course for a
bankruptcy court. possible default in the near future.™

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