Sunday, March 29, 2015

Vulnerable Oil Producers Tap Restructuring Advisors To Negotiate With Lenders


By Madalina Iacob

The record drop in oil prices over the last six months has consumers – and some investors – cheering. Optimists believe that the economy is ripe for a boost as would-be shoppers earmark their extra cash to spend on anything from dining out to apparel.
While shopping sprees may prop up some economic segments, there’s a darker side to the oil price plunge. Dozens of small oil and gas exploration and production companies in US regions like the Bakken formation and Permian basin collectively took out tens of billions of dollars of debt in recent years – predicated on the assumption that $100 per barrel oil was here to stay. Those highly levered capital structures are already starting to crack, as earnings slow down and the cost to drill doesn’t justify the revenue that the oil brings in.
A handful of the high-cost, debt-saddled exploration and production companies have already hired restructuring advisors and in a few cases have pulled the trigger and filed for Chapter 11.
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