HAVE WE SCRAPED THE BOTTOM OF THE BARREL?
THE PROSPECT of long-term low oil prices looms
large over domestic exploration and production companies. Prices
have declined dramatically from the peak in June 2014 of $112 per
barrel for Brent crude to the $30 to $40 per barrel range we are
seeing today. While the number of oil and gas companies filing for
bankruptcy over the past year numbers around 20, many more are in
the process of hiring - or have recently hired - restructuring
advisers. Others have been flagged by ratings agencies and analysts
as over-leveraged, high-default risks.
Low commodity price levels continue (for what many increasingly
believe will be a prolonged period) and favorable hedges started to
roll off at the end of 2015 and continue to do so into 2016. It was
against this background that the oil and gas industry, facing high
degrees of uncertainty and varying levels of distress, entered into
the fall redetermination season of 2015.
