Winners and Losers of the Oil Bust

Many driller companies and other business with ties to the oil and gas industry are feeling the pinch of low oil prices. Banks such as Wells Fargo & Co., Bank of America, Citigroup Inc. and JPMorgan Chase & Co. have set aside $2.5 billon combined to cover energy sector (oil and gas related) loan losses. These banks are prepared to increase that dollar amount if needed.

In 2015, 42 U.S. energy companies went bankrupt owing more than $17 billon. Dune Energy Inc. was one of these companies. They owed $144.2 million, their assets sold for $20 million. American Eagle Energy Corp. had debts of $215 million and their properties sold for $45 million this past October. BPZ Resources Inc. owed $275.2 million their assets sold for about $9 million. Endeavour International Corp. went bankrupt, they owed $1.63 billon, and they sold some assets for $9.65 million and gave the rest of their assets to lenders.

ERG Resources LLC owns about 19,000 acres in an oil field that was discovered in 1908 and it has produced 300 million barrels of crude since then. ERG was planning to extract more oil from this aging field then oil prices declined and ERG declared bankruptcy in April of 2015 owing about $400 million. They found no qualified buyer willing to pay its minimum bid of $250 million.

There will be more companies that follow suit; this past September (2015) Samson Resources Corp filed for bankruptcy listing $4.2 billion in debt. With bankruptcies increasing and more liquidations coming to market, bargain hunters will not pay top dollar, with so many deals to be found. These deals will create some big winners, such as, White Marlin Oil & gas Co. They have picked up assets, auctioned off at deep discounts. 

Source: Paul Thares, South Dakota State University