U.S. oil industry bankruptcy wave nears size of telecom bust
By Ernest Scheyder and Terry Wade
HOUSTON (Reuters) - The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week's filings for creditor protection by Midstates Petroleum MPOY.PK and Ultra Petroleum UPL.NL.
The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com.
Charles Gibbs, a restructuring partner at Akin Gump in Texas, said the U.S. oil industry is not even halfway through its wave of bankruptcies.
"I think we'll see more filings in the second quarter than in the first quarter," he said. Fifteen oil and gas companies filed for bankruptcy in the first quarter.
Some oil producers appear to be holding on, hoping the price of crude stabilizes at a higher level. In February, oil slumped as low as $27 a barrel from peaks above $100 a barrel nearly two years ago. U.S. crude has recovered somewhat, and on Tuesday was trading a little below $44 a barrel. [O/R]
Until recently, banks had been willing to offer leeway to borrowers in the shale sector, but lately some lenders have tightened their purse strings.
A widely predicted wave of mergers in the shale space has yet to materialize as oil price volatility makes valuations difficult, and buyers balk at taking on debt loads until target companies exit bankruptcy.
The telecom and energy boom-and-bust cycles have notable parallels. Pioneering technology brought an influx of investment to each industry, a plethora of new, small companies issued high levels of debt, and a subsequent supply glut sapped pricing just as demand fell sharply. Continued...