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Q1 Bankruptcy: Energy Still Struggling

By Kirk O'Neil | Published on March 29, 2018

Predictions by bankruptcy attorneys and advisers late last year that distress in the energy sector would begin to diminish as energy prices rise and Chapter 11 filings in the industry would decrease were not proven correct in the first quarter of 2018.

Adviser argue that oil prices have risen into the $60 range and many of the distressed companies already have fixed their problems over the past three years either in or out of court.

West Texas Intermediate crude oil has fallen from about $105 a barrel in June 2014 to $67.51 on April 13. WTI prices were as low as $42.53 over the past year.

Henry Hub natural gas prices fell from $4.59 per million British thermal units to $2.75 per MMBtu in the same period. Henry Hub prices were as low as $2.53 in the past year.

Both price indexes have recovered somewhat over the past year but need to rise higher for the energy sector to have a significant turnaround.

Despite confidence from bankruptcy attorneys and advisers that fewer oil, gas and power companies would seek bankruptcy protection this year, energy companies still filed a healthy volume of Chapter 11 cases in the first quarter with no evidence that the trend will shift into reverse.

The jury is still out on whether predictions that the retail and healthcare sectors will be the most active this year in bankruptcy filings as both sectors have had significant companies file Chapter 11 in the first quarter. However, the volume of filings in the retail and healthcare sectors for the first quarter does not measure up to the energy sector’s activity.

The energy sector started the year with a flurry of Chapter 11 filings in the first quarter including petitions by oil and gas producer Exco Resources Inc., oil well driller Triad Well Service LLC and oil refiner PES Holdings LLC, all in January.

Significant energy bankruptcy filings continued in February with natural gas producer Ascent Resources Marcellus Holdings LLC and offshore oil and gas producer Fieldwood Energy LLCseeking Chapter 11 protection. Ascent’s bankruptcy was a quick one, as it emerged from Chapter 11 on March 30.

The energy industry finished the first quarter with a flurry of Chapter 11 filings in March, including power plant owner FirstEnergy Corp., offshore drilling service provider HGIM Holdings LLC, natural gas producer Augustus Energy Resources LLC, oil and gas extractor Golden Oil Holding Corp and wood pellet maker Sega Biofuels.

The healthcare sector had a few significant Chapter 11 filings, but not the volume that advisers were expecting in the first quarter. Among the notable filings were senior care facility operator HCR ManorCare Inc., medical practice services provider Orion HealthCorp, nursing home operator Wachusett Ventures LLC and regional acute care hospital Miami International Medical Center LLC, all of which filed in March.

The retail sector had a steady stream of Chapter 11 filings in the first quarter with women’s apparel retailer A’Gaci LLC and auto parts retailer Auto Supply Co. filing in January; Tops Friendly MarketsBon-Ton Stores Inc. and men’s apparel retailer Bachrach filing in February and accessories retailer Claire’s Stores and supermarket chain owner Southeastern Grocersfiling in March.

 

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