According to Haynes and Boone, bankruptcy surged in the North American energy sector in the third quarter as companies struggled to cope with weak fuel demand, according to Haynes and Boone law firms.
Seventeen oil producers sought bankruptcy protection in the three months to September, a 21% increase in such filings in the first nine months of 2020 over the same period last year, according to a report on Tuesday. As oil producers stop or cut back on exploration and drilling to control costs, oilfield service providers are hit harder.
According to the report, 26 service companies filed new bankruptcy filings in the third quarter, compared with 11 in the same period last year.
The pain will intensify as lenders redefine how much credit producers should get every two years.
According to a survey by Haynes & Boone, available loans are expected to decline by 15.7% after the redefinition season in autumn. During the spring redefinition period, tens of billions of dollars in borrowing were cancelled.
Haynes & Boone said the midstream industry was relatively unaffected by the recent slump, but many midstream industries could file for bankruptcy for the rest of the year as market turmoil continues and manufacturers try to avoid onerous contracts.
As of September 30, since 2015, only 32 midstream companies have applied for Chapter 11 bankruptcy protection in the United States, of which only one filed for bankruptcy in the third quarter.