Production Remains the Same despite Increasing Number of Bankruptcies in Oil and Gas Companies

by San Antonio Attorney

The dramatic drop of oil price has been causing a surge of bankruptcy filings in the energy industry, driving a number of American energy producers that used to sit at ease with expensive commodity and oil prices before 2014 to now find ways to reorganize their debts and businesses.

Regardless, the majority of the troubled energy companies keep producing oil, coal and natural gas, and in spite of their frantic financial position, they are still in the business.  Many of them have successfully completed their Chapter 11 case.

In contrast to earlier projections that cheaper commodity prices would logically drive a lot of of less cost-efficient companies out of business, these business entities are still around.  A number  of them are filing for Chapter 11 bankruptcy to restructure reduce costs and get out of debt, while maintaining the levels of production.

Moreover, making handsome profits from US$100 oil price had put off energy companies from finding more cost-efficient methods of conducting business.

According to reports, about 105 North American gas and oil companies have filed for bankruptcy starting January 2015.  The bankruptcies cases include Chapter 15, Chapter 11, Chapter 7, and Canadian cases.  In 2016, 61 oil producers have filed for bankruptcy so far.  Texas is the tops the list with 46 companies filing for bankruptcies, the reports show.

Nevertheless, the fundamental theory that more bankruptcies would cause considerably lower oil production was incorrect.

Coal production also remains the same despite the bankruptcy filings of Alpha Natural Resources, Arch Coal, and Peabody Energy.

 

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