Oil firms file for bankruptcy as recovery turns tough

  • Nigeria mulls 100 oil, gas projects by 2025


Record number of oil and gas companies are filing for Chapter 11 bankruptcy protection.


According to energy and restructuring law firm, Haynes and Boone, bankruptcies by the oil firms, especially the North American oil producers, climbed to the highest first-quarter level since 2016 as energy firms continue to struggle to recover from the carnage of the oil price crash in 2020.



Haynes and Boone has reported there were eight bankruptcies by North American oil and gas producers in Q1’21, the second-highest figure for a first-quarter ever since 17 were reported for Q1’16, the last time U.S. crude futures dipped under $30 a barrel over the past decade. Crude prices have bounced back from yearago lows, with WTI trading around $63 a barrel on Friday while Brent is changing hands at $67 a barrel.


The big difference this time around is that smaller producers appear to be the main victims, with just $1.8 billion in aggregate debt for the quarter, the second-lowest Q1 total after $1.6 billion in Q1’19.


Meanwhile, as many as 100 oil and gas projects are set to start in Nigeria by 2025, accounting for 23 per cent of all projects starts in the industry in Africa within the next five years, data and analytics company, GlobalData, said in a new report.


Petrochemical projects will hold the highest share of new startup projects in Nigeria through 2025, with 28 projects, followed by 25 expected upstream oil and gas projects, 24 refinery projects, and 23 midstream projects, according to GlobalData estimates. In the upstream, some of the notable projects include the Deepwater Bonga North oilfield and the onshore conventional gas Okpokunou Cluster Development.


Bonga North is currently in its Front End Engineering Design (FEED) stage and is expected to start operations by 2025. Cluster Development is at a feasibility stage and is expected to begin operations by 2024, GlobalData said.


Projects in Nigeria’s refining sector will also be closely watched as the biggest African economy is eager to reduce its reliance on fuel imports, revamp its old refineries and build new ones.


The 650,000 barrel per day Lagos refinery is a key project expected to start operations in 2022 and become the largest oil refinery in Africa.


“Nigeria is betting on several refinery and petrochemicals projects to meet its growing domestic demand and reduce its reliance on imports. The projects also have potential to transform Nigeria as an exporter of refined products to neighboring countries”, Teja Pappoppula, Oil & Gas Analyst at GlobalData, said.


For some perspective, consider that last year, U.S. energy companies that filed for bankruptcy held $53 billion in aggregate debt, the second-highest total since 2016 when debt totaled $56.8 billion. As expected, Texas continues to be well represented, with half of the bankruptcy filers coming from that region. HighPoint Resources Corp.


(NYSE:HPR) was the largest debt-holder to file, with $905 million in secured and unsecured debt.


Apart from oil and gas producers, a total of five oilfield service companies also filed for bankruptcy, with offshore driller Seadrill Ltd (OTCQX:SDRL) accounting for most of the sector’s $7.2 billion debt.


Luckily, many producers and oilfield services companies have reached an inflection point, with the energy demand outlook considerably improved from just a few months ago.


Last week, the IEA issued a bullish oil report for 2021 whereby it revised up global oil demand in 2021 by 230,000 b/d to 96.7 mb/d, good for a 5.7 mb/d increase from 2020 levels.


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