More than 100 Canadian and U.S. fossil businesses have declared bankruptcy since the beginning of the year, according to a monthly report released this week by Dallas, Texas-based corporate law firm Haynes and Boone.
The oil price crash “has made 2016 one of the worst years on record for industry bankruptcies since a similar global oil glut in the 1980s wiped out scores of energy companies,” Salon reports. “And now, the survivors who have been able to stay in business with oil hovering at $40 to $50 a barrel are waiting to see if oil prices can stabilize enough for them to snatch up assets from their failed rivals.”
But other recent news suggests they shouldn’t hold their breath: The International Energy Agency forecast this month that the price crash will go into a fourth year and continue through 2017.
Surviving fossils, meanwhile, may be waiting to see what happens next. “When a hurricane is out in the Atlantic, you don’t know whether to move or to stay in place,” said Bernard Clark, head of Haynes and Boone’s energy practice. “The industry hopes and expects we’re over the hump. If oil can stay in a predictable price range, companies can make business decisions.”
Salon documents a big uptick in U.S. fossil bankruptcies, from 44 companies with US$17.4 billion in debt last year, to 58 businesses with $50.4 billion in less than three-quarters of 2016.
“Fueling the current wave of bankruptcies has been a debt-fueled U.S. energy boom,” writes correspondent Angelo Young. “From 2011 to 2015, oil and gas companies piled on $150 billion in debt, reaching a total of over $350 billion, in their rush to fund growth and take advantage of high oil prices.”
Tim Hynes, head of research at bankruptcy forecaster Debtwire, told Salon that “most of the companies that had too much debt have either already filed for bankruptcies or have restructured.” But he cited a curious source for his optimism: while there are now 135 borrowers on his watch list, “that’s a significant drop” from the 183 companies he was monitoring when oil hit its low of $26 per barrel, down from $120 per barrel in 2012.