Oilpatch Servicers Slip Into Bankruptcy as Prices Rally Too LateBy
Basic Energy plans to follow Key with Chapter 11 court filing
Managers seek to cut debt piled up when oil prices soared
The rally in energy prices is coming too late to save some of the most troubled oil services companies.
Basic Energy Services Inc., which has been working with creditors to align its debt burden with depressed energy prices, said it will file for bankruptcy by Oct. 25. The move would come just a day after Key Energy Services Inc. filed for bankruptcy protection.
At least 100 North American oilfield services companies have gone bankrupt in 2015 and 2016 as energy prices slid, according to a tally by the law firm Haynes & Boone LLP. Debt burdens taken on when oil topped $100 a barrel earlier in the decade are proving unmanageable now that prices are at about half that level, even after this year’s 35 percent rally.
Creditors of Basic Energy including secured term lenders and senior unsecured bondholders have agreed to a prepackaged reorganization plan that calls for Chapter 11 filings by the parent and some subsidiaries, the Fort Worth, Texas-based company said Monday in a statement. The company warned in a July 29 filing it may be unable to stay in business if it couldn’t find a way to repay or refinance its debts, and it skipped an $18.4 million interest payment in August.
The plan proposed Monday will reduce debt and provide $125 million of liquidity, according to the statement. The timetable envisions the company out of bankruptcy before the end of the year, Basic Energy said.
Holders of the $775 million of unsecured notes due 2019 and 2022 will receive 99.5 percent of the reorganized company’s equity while existing shareholders initially will wind up with 0.5 percent. Those stakes are expected to be diluted further based on other terms of the plan, the company said.
The “sharp and prolonged period of depressed commodity prices” in recent years sapped operating cash flow, Chief Executive Officer Roe Patterson said in Monday’s statement. The company employed about 3,900 people as of Dec. 31, according to its annual report.
Well-servicing contractor Key Energy said in August that it would use the Chapter 11 process to hand over control to bondholders. The Houston-based company also blamed the decline in oil prices for cutting demand. It operates in most major oil-producing regions of the U.S., as well as in Canada and Russia. Most of its 2,900 employees are in the U.S., according to court papers.