Crude oil and natural gas prices reached multiyear lows of approximately $26 per barrel for crude oil (as of January 2016) and $1.50 per million British thermal units (mmbtu) for natural gas (as of March 2016). This represented a 75 percent decline in the price of oil from its peak of approximately $105 per barrel in mid-2014 and an 80 percent decline in the price of natural gas from its early 2014 peak of over $8 per mmbtu. At the time, many industry observers predicted that depressed commodity prices would result in numerous bankruptcy filings and an uptick in M&A activity.
With one exception, the Top 10 List of "public company" (defined as a company with publicly traded stock or debt) bankruptcies of 2016 consisted entirely of energy companies—solar, coal, and oil and gas producers—reflecting, as in 2015, the dire straits of those sectors caused by weakened worldwide demand and, until their December turnaround, plummeting oil prices. The exception came from the airline industry. Each company gracing the Top 10 List for 2016 entered bankruptcy with assets valued at more than $3 billion.
In a recent decision in the Southern District of New York, the court addressed a challenge to a secured-for-unsecured debt exchange offer that raised and answered a host of questions on the potential vulnerability of offers of this type. In Waxman v. Cliffs Natural Resources (SDNY December 6, 2016), the court dealt with standing to pursue a challenge; TIA §316(b) after Marblegate and MeehanCombs/Caesars; the no-action clause and allegations of conflict of interest of the trustee; the remedies clause; and discrimination against non-QIBs.
Like the wild prairie rose that punctuates the North Dakota plains, the issue of whether a debtor can reject its midstream agreements is back after a brief period of dormancy. In Hot Topics in Oil and Gas Restructurings, Volume 3, we described how the U.S.
The bankruptcy of solar power developer SunEdison has been one of the most discussed topics of the US renewable energy market in 2016. Christy Rivera, partner in Chadbourne’s bankruptcy group, joins us to discuss outcomes, surprises and lessons learned from SunEdison’s bankruptcy filing.
The current decline in oil prices, which continues to show no signs of a long-term reversal, is having unexpected and unwanted consequences, many of which may turn into long-lasting troubles for the oil and gas industry, especially for its investors.
As many investors anticipated, the deep trough in the commodities market over recent years resulted in a number of companies in commodity industries restructuring their balance sheets through a Chapter 11 bankruptcy process. Because companies often reorganize in the midst of a market downturn, a commodity company’s low EBITDA during this time usually results in low values being placed on the company’s reorganized equity.
Bankruptcy
At the risk of stating the obvious, the collapse of oil and gas prices in the last several quarters has had a profound impact on the industry. Some E & P companies have been able to weather this storm, but other have not been so fortunate. In the time between 2014 and September 14, 2016, 102 oil and gas producers with cumulative debts of over $67 billion, 13 midstream companies with cumulative debts of over $17 billion and 132 oilfield service companies with cumulative debts of over $14 billion have filed bankruptcy petitions.
Arch Coal has announced that it has successfully completed financial restructuring and has emerged from bankruptcy. Shares of the reorganized company began trading last week on the NYSE under the ticker ARCH, according to the Wall Street Journal.
U.S. Bankruptcy Judge Stuart Bernstein recently approved SunEdison’s proposed sale of $144 million of solar and wind assets to NRG Energy. The sale continues SunEd’s string of dispositions this year following its April bankruptcy filing. The company’s stunning descent has followed an equally aggressive rise over the preceding three years.