It should come as no surprise that North American oil and gas producers are struggling in today's current low-price environment. Companies seeking relief from uncontrollable outstanding debt can file one of two types of bankruptcies: Chapter 7 or Chapter 11.
If a Chapter 7-type of bankruptcy is filed, the company halts all business operations and liquidates any assets to pay off debt, closing the door to its business.
More frequently, a Chapter 11-type of bankruptcy can be used. Once filed, the company can potentially "reorganize" its business to eventually become profitable again. Administration continues with the day-to-day operations, but all major business decisions must be permitted by a bankruptcy court.
Since the start of 2015, international corporate law firm Haynes & Boone LLP tracked 85 North American oil and gas producers that filed for bankruptcy. These cases account for nearly $61.2 billion in cumulative secured and unsecured debt. For this year's first half, of those firms filing bankruptcy, 43 were oil and gas producers with a cumulative total of roughly $44 billion in secured and unsecured debt.
In June, only 4 exploration and production companies filed with total debt of around $1.5 billion, where in April, 11 E&P companies filed with $14.7 cumulative debt, and 12 filed in May with a cumulative debt of $25.6 billion. The state of Texas holds the most filings with 43 E&P companies in bankruptcy courts and with the most cumulative debt of over $29 billion. Delaware has 15 bankruptcy cases and $15.3 billion in cumulative debt and holds the No. 2 spot.
Top ten cases
In April, Haynes & Boone released a report of the top 10 bankruptcy cases of companies with filings from the beginning of 2015 through end of this past March. At the time of the release, Samson Resources Corp. led the list with more than $4 billion in total debt. The company is currently seeking an alternative restructuring plan and has been approved by the courts to sell at auction various oil and gas wells with a collective PV9 reserve value of $16.5 million.
The No. 2 case is with Sabine Oil & Gas Corp., with $2.9 billion in total debt. The firm's restructuring plan includes debt-for-debt exchange, a debt-to-equity conversion, and the issuance of stock warrants.
With $2.1 billion in debt, Quicksilver Resources Inc. was No. 3 on the list. The court approved the sale of Quicksilver's US oil and gas assets to BlueStone Natural Resources LLC for $245 million. With $1.2 billion in total debt, Swift Energy Co. was No. 4. Swift negotiated with senior noteholders to a restructuring support agreement, where senior notes would be converted to 96% of the common stock of the reorganized Swift. Swift also sold certain assets in Louisiana to Texegy LLC in exchange for approximately $49 million.
The remaining E&P firms on the bankruptcy list are: No. 5, Energy & Exploration Partners Inc., $1.2 billion in total debt; No. 6, Magnum Hunter Resources Corp., $1.1 billion; No. 7, Milagro Oil & Gas, $1.1 billion; No. 8, Venoco Inc., $952.1 million; No. 9, New Gulf Resources LLC, $586 million; and No. 10, ERG Operating Co. LLC, $409.7 million
Since the release of the report by Haynes & Boone, additional E&P firms have filed and should be cited as noteworthy with their respective total debt:
• Sandridge Energy Inc., $8.3 billion.
• Linn Energy LLC, $6 billion.
• Breitburn Operating LP, $5.8 billion.
• Pacific E&P Corp., $5.3 billion.
• Ultra Petroleum Corp., $3.8 billion.
• Energy XXI Ltd., $2.8 billion.
• Halcon Resources Corp., $1.8 billion.
"Despite the modest recovery in energy prices, all indications suggest many more producer bankruptcy filings will occur during 2016," writes Haynes & Boone.
With some bankrupt companies selling assets-to reduce their debt-much lower than what they invested in, smaller businesses can take advantage of the opportunity to own solid properties.

Laura Bell-Hammer | Statistics Editor
Laura Bell-Hammer has been the Statistics Editor for the Oil & Gas Journal since 1994. She was the Survey Editor for two years prior to her current position with OGJ. While working with OGJ, she also was a contributing editor for Oil & Gas Financial Journal. Before joining OGJ, she worked for Vintage Petroleum in Tulsa, gaining her oil and gas industry knowledge.