Oil and gas companies have faced declining prices of Brent Crude and West Texas Intermediate Crude since April 2024, which has constrained their liquidity and caused financial distress.
Financial difficulties have led some oil companies to seek out-of-court restructurings or Chapter 11 bankruptcy filings as prices continue to fall.
💸💰 Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💸
The average price of Brent Crude oil rose from $80.12 in January 2024 to $89.94 in April before tumbling to $74.35 in November, according to data firm Statista.
Related: Struggling beverage maker files for Chapter 11 bankruptcy
The average price of West Texas Intermediate Crude rose from $74.15 in January 2024 to $85.35 in April 2024 before falling to $69.95 in November 2024.
Other economic factors have also affected the financial condition of oil and gas companies.
Oil-and-gas services company Nitro Fluids, which provides fracking services to oil and gas companies, on May 15 filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the Southern District of Texas in Victoria, facing a huge revenue decline that it blamed on industry consolidation.
Litigation is another financial burden that can force oil and gas companies to file for bankruptcy protection.
Petroleum products company Stanley Oil & Lubricants on Sept. 17 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of New York after a U.S. District Court judge granted one of the debtor's suppliers a preliminary injunction against it in a trademark and copyright infringement lawsuit, freezing certain assets and halting certain business activities.
Oil and gas company PetroQuest Energy Inc. also had legal problems and filed for Chapter 11 protection on Nov. 13 with plans to sell its assets as it faced severe liquidity issues after losing a court judgment in a breach of contract lawsuit in July 2024.
The judgment required it to return an $11.5 million purchase price deposit for its East Texas assets and pay attorney fees, which it could not afford to pay, according to a declaration by CFO Angelle Perret.
Independence Contract Drilling to hand ownership to lenders
Finally, oil drilling services company Independence Contract Drilling filed for Chapter 11 protection with a prepackaged reorganization plan that will hand 100% of the company's reorganized equity to its prepetition secured noteholders.
Related: Struggling fast-food restaurant chain files Chapter 11 bankruptcy
Independence filed its petition in the U.S. Bankruptcy Court for the Southern District of Texas on Dec. 2 listing $356.8 million in assets and $216.7 million in debt.
More bankruptcy stories:
- Another popular pizza chain files for Chapter 11 bankruptcy
- Popular vodka brand files for Chapter 11 bankruptcy
- Auto parts retailer dumps hundreds of stores, no bankruptcy yet
The Houston-based debtor's largest unsecured creditors include Texas Steel Conversion, owed about $978,000; Red Stone Operations, owed $926,000, and Noah's Service & Supply, owed about $553,000.
Independence, which provides contract oil drilling services, suffered macroeconomic shifts and trends in the oil and natural gas industries, constraints in the capital markets, and lingering effects of the Covid-19 pandemic, according to a declaration from CEO J. Anthony Gallegos.
The debtor's business depends on a level of exploration and production by oil and gas companies with which it signs contracts, the declaration said.
The oil services company on March 24 began a marketing process for an asset sale transaction, but it did not receive any actionable bids or proposals that would repay its secured debt.
Facing an upcoming convertible notes maturity and liquidity and market headwinds, the debtor was forced to file for Chapter 11 protection.
The debtor on Dec. 3 filed another declaration asserting 100% support of the prepackaged reorganization plan from its secured noteholders holding $206.7 million in note claims.
Independence secures DIP loan approval
The company on Dec. 4 won approval of an interim order signed by Judge Alfredo R. Perez authorizing the use of its cash collateral and $32.5 million in debtor-in-possession financing to fund its obligations during its bankruptcy case.
Perez also set a final hearing on the DIP loan and a reorganization plan confirmation hearing for Jan. 9.
Independence Contract Drilling targets unconventional oil and gas exploration and development using its ShaleDriller drilling rigs. It employs about 387 full-time workers at facilities in Houston, Midland, and Odessa, Texas, and Coushatta, La., with rigs in the Permian Basin and Haynesville Shale.
Gallegos asserted in his declaration that in the three months ended Sept. 30, 2024, the company's average quarterly operating rig count had fallen from 19.4 rigs in the first quarter of 2023 to 13.1 rigs in the third quarter of 2024 with an expected 10.7 rigs in the fourth quarter of 2024.
Related: Veteran fund manager sees world of pain coming for stocks
