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Yet Another Shale Producer Files For Bankruptcy

Eagle Ford producer Lonestar Resources filed for bankruptcy protection under Chapter 11 this week, becoming the latest casualty in the string of bankruptcies in the U.S. shale patch this year. 

Lonestar Resources filed for relief under Chapter 11 in the United States Bankruptcy Court for the Southern District of Texas, as a growing number of U.S. oil and gas producers – from small players to giants – are saddled with debt they cannot repay with oil prices so low.

This week, Oasis Petroleum Inc also filed for a voluntary Chapter 11 process aimed at restructuring that is expected to reduce its debt by US$1.8 billion.  Oasis Petroleum has enough liquidity to maintain operations and expects to emerge from the restructuring process in November 2020, subject to Court approval, the company said.

Dozens of shale producers have already filed for bankruptcy protection this year, with Chapter 11 filings accelerating after oil prices crashed in March and U.S. shale producers curtailed production in the following months.

Notable bankruptcies included Permian producer Rosehill Resources, California Resources, and Denbury Resources. Shale giant Chesapeake Energy also filed for bankruptcy at the end of June.

According to data from law firm Haynes and Boone as of August 31, a total of 13 producers filed for protection in July and August, which, combined with the rest of the filings this year, represents a 62-percent increase over this time last year.

“It’s not quite the level of filings reached in 2016 but a disturbing trend nevertheless. It is interesting to note that the total secured debt involved in 2020 producer bankruptcies to date already exceeds the total amount of secured debt for all producer filings in 2016,” Haynes and Boone said.

“Until full economic activity returns and consumer confidence that the worst of the pandemic is behind us, demand levels will remain depressed. “Lower for longer” remains the watchword for producers and their creditors,” the law firm said.

By Josh Owens for Oilprice.com 

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