Posted on 08/19/2015 11:40:38 AM PDT by Lorianne
With West Texas Intermediate crude now below $42 a barrel, the edifice of America’s oil and gas boom is finally crumbling. The number of companies in bankruptcy or restructuring has increased, and the clouds will only grow darker in the months ahead. Declining revenues, evaporating earnings and shrinking values of oil and gas reserves will put the crunch on oil companies’ ability to refinance loans, let alone borrow new cash or sell shares.
Last week two companies showed that having a heroic name is no defense. Hercules Offshore, a Gulf of Mexico drilling contractor, announced it had reached a prepackaged bankruptcy with creditors to convert $1.2 billion in debt into equity and raise $450 million in new capital. While Samson Resources on Friday said it is negotiating a restructuring that will see second lien holders inject another $450 million into the company in return for all the equity in the reorganized company.
Samson is the biggest bankruptcy of the oil bust so far, and a huge black eye to private equity giant KKR, which in 2011 led a $7.2 billion leveraged buyout of the company. The deal was a classic LBO: about $3 billion in equity backed by more than $4 billion in debt. It seemed like a good idea at the time. Tulsa, Oklahoma-based Samson, founded in the 1970s by Charles Schusterman, had grown to be one of the biggest privately owned oil companies in the nation. It held vast swaths of acreage in North Dakota, Texas and Louisiana seemingly ripe for redevelopment. The sophisticated KKR team assumed it could squeeze a lot of value out of Samson, which since Schusterman’s death in 2001 had been run by his daughter Stacy.
It didn’t take long for KKR and its equity partners to realize they had overpaid tremendously.
(Excerpt) Read more at forbes.com ...
Ping.
In an operations update last week EXXI said it expends $52 in cash for every BOE (barrel of oil or natural gas equivalent) it produces. At current commodity prices it’s losing at least $10 per BOE, of which it produces more than 55,000 per day. Interest payments and preferred dividends amount to $19 per BOE. That’s a lot of cash burn.
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Looks like a question only of when, not if, bankruptcy occurs.
Obama is also working to getting frackers out of business by regulating nitrogen.
Or hydrogen or some gen thing.
An interesting mix of crazy financial stuff going down:
- Oil prices have plummeted, yet gasoline/fuel prices have NOT fallen anywhere near in proportion... (but we all know, if oil prices increased even a tick, gasoline prices would immediately increase with it... go figure).
- Obama’s “war on coal” has accelerated - yet that doesn’t immediately help the natural gas industry because there is no immediate replacement for the coal plants with natural gas-fired generators.
- Natural gas prices, though the market is supposedly saturated, have not changed in the last few years. Strange that petroleum prices and its derivatives seem so radically reactive to every little blip, but natural gas - not so much. OH _ its because we have finally been allowed to actually start using OUR OWN.
Still...
Every time we really start to utilize our own natural resources (specifically, oil), the “powers that be” somehow figure out how to drop the price of oil to make it unprofitable for US Producers (or so we are told).
Oil and gas were suppose to be the saviors of our economy... what a foolish basket in which to stake nearly our whole economic future on... maybe we need our manufacturing base back... Oh - that would require the government to GET OUT OF THE WAY, and to reduce taxes and other costs.
And of course, politicians have no backbone...
Frackers did what the government could not do, lower costs of oil and increase standard of living without increasing wages.
- The Government
We’re doomed!
It’s not the low oil prices that is causing the bankruptcies, it’s going hog wild with borrowed money.
Frackers is a terrible term to describe oil producers.
Secondly, it is methane releases being regulated, not nitrogen.
Nitrogen is 78% of our air already.
overpaid tremendously.....
those are scary words.
Restructuring does not equal “falling.”
Stupid Forbes is starting to sound like the “business insider” and “economiccollapse” blogs.
Of course, lots of folks on FR eat that stuff up...
Gastar Exploration is now down to $1.40. I bought in last round at 2, rode it to 7 before selling. Thinking it might be time to buy into it again.
Sand Ridge is down to $.49/share from $2.55 a couple months ago.
Exactly ... but apparently it’s not a problem as they can just keep ‘restructuring’.
Right. I knew it was some gas. Hell, they’ll try to ban nitrogen too. Isn’t there a lot of carbon dioxide around too?
Start exporting, and drill, baby, drill, and we’ll kill foreign oil companies, not ours.
Carbon Dioxide (CO2) is ~400 parts per million or 0.04% of our air.
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