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Q2 League Tables: Energy Bankruptcy Filings Still Active

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

Increased oil and natural gas prices in recent months have not yet stopped the flow of energy companies seeking Chapter 11 protection.

Attorneys and advisers expected distress in the energy sector to diminish as oil prices rose into the $60 range and since many distressed companies had already fixed their problems over the past three years either in or out of court.

But that hasn’t been the case in the months coinciding with the price increases. The energy sector was by far the most active sector for companies filing for bankruptcy in the second quarter, as many oil and gas exploration and production companies resorted to filing Chapter 11 to reorganize after unsuccessfully trying to restructure out of court.

Among the energy companies filing Chapter 11 in the second quarter was New Mach Gen LLC in June. Companies filing in May included Enduro Resource Partners LLC, Rex Energy Corp., and Worthington Energy Inc.

EV Energy Partners LP filed Chapter 11 in April and already emerged from bankruptcy in June after restructuring. Erin Energy Corp. and Nighthawk Energy plc joined EV in Chapter 11 also in April.

Attorneys and advisers also believed retailers would be among the most active in filing Chapter 11 in the second quarter, but the retail sector wasn’t as active as many had expected.

Some of the more notable retail bankruptcy filings in the second quarter included footwear retailer Rockport Co. LLC, which filed in May, and women’s apparel and accessories retailer Nine West Holdings Inc., which filed in April.

Restructuring attorneys and advisers expect the retail and energy sectors to be the most active for Chapter 11 filings through the second half of 2018.

Oil and gas exploration and development companies and ancillary suppliers will continue filing bankruptcy through the end of the year, as these severely distressed companies restructure through a slow recovery from a rise in energy prices. That recovery could reverse itself if oil production rises and prices fall again.

Retailers will continue to suffer from an excessive brick-and-mortar presence in regional malls and other shopping centers, as foot traffic decreases from consumers purchasing more products online. Amazon.com Inc.‘s (AMZN) increased activity in internet commerce will force many retailers to re-examine their business models and try to drive more online retail traffic.

Bankruptcy filings rose by about 1% in 2017, compared with 2016, according to a February PricewaterhouseCoopers LLP review of bankruptcies and out-of-court restructurings in 2017. The report predicted a similar year for restructurings in 2018, with few macro headwinds that would drive bankruptcy numbers higher.

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