More than 100 oil and gas companies declared bankruptcy in 2020 after the coronavirus pandemic plunged the energy sector into the worst downturn in a generation.

Forty-six exploration and production companies and 61 oil-field service companies filed for Chapter 11 bankruptcy last year, according to Haynes and Boone, a Dallas law firm tracking bankruptcies. The 107 oil and gas bankruptcies in 2020 were the most since 142 bankruptcies were filed during the last oil bust in 2016.

“Since 2015, more than 500 bankruptcies have been filed in the North American oil and gas industry,” Haynes and Boone said in its latest bankruptcy report published this month. “In hindsight, 2020 stands out over this dismal period for the industry setting a number of records.”

Oil and gas companies have been hit hard by the coronavirus pandemic, which crushed global demand for crude and petroleum products such as gasoline and jet fuel. Unlike past downturns, oil and gas companies have been under increased financial pressure after many investors pulled out of the sector in 2018 after years of low-to-middling performance. Several energy companies said they were forced to file for bankruptcy after lenders pulled credit lines as revenue dried up.

More than a fifth of the bankruptcies last year — 14 exploration and production companies and nine oil-field service companies — brought more than $1 billion of debt to court. Multibillion-dollar bankruptcy cases were filed by Chesapeake Energy ($11.8 billion), Diamond Offshore Drilling ($11.8 billion) and California Resources ($6.3 billion). Ultra Petroleum filed for its second bankruptcy in five years, bringing $5.6 billion to court in 2020.

Since the previous oil bust ended in 2016, oil and gas companies brought more than $286 billion of debt to court. During 2020 alone, more than $98 billion has been brought to court, compared with $70.3 billion during the previous oil bust, Haynes and Boone said.

The mounting bankruptcies are expected to lower U.S. shale oil production by about 200,000 barrels, or 25 percent, by the end of 2021, according to an analysis by Norwegian energy research firm Rystad.  This production loss from bankrupt companies in the Eagle Ford of South Texas and Bakken of North Dakota will eat into the U.S. production growth expected this year.

Alastair Caithness, CEO of Ziyen Energy, commented on the article,

“Ziyen Energy was affected during the COVID-19 pandemic, with three domestic oil and shale gas producers filing for Chapter 11 bankruptcy, where Ziyen Energy held interests in projects they operated.  The US domestic oil sector as a whole experienced widespread losses during this period and it was a time filled with uncertainty and instability.”  

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