Oil-and-gas companies have struggled with declining prices since April 2024, which has put pressure on their liquidity. Plummeting oil prices can be a major reason for financial distress that leads to out-of-court restructurings and Chapter 11 bankruptcy filings.
The average price of Brent Crude oil rose from $80.12 in January 2024 to $89.94 in April before tumbling to an average of $74.02 in September, according to data firm Statista.
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The average price of West Texas Intermediate Crude rose from $74.15 in January 2024 to $85.35 in April 2024 before falling to $70.24 in September 2024.
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The price of oil has continued to decline as West Texas Intermediate Crude on Nov. 15 fell $1.68 a barrel or by 2.45% to $67.02, while Brent Crude declined $1.52 or by. 2.09% to $71.04 per barrel.
While lower oil prices are an economic hardship that can push oil companies into bankruptcy, other factors have also contributed to to Chapter 11 filings this year in addition to lower oil prices.
Oil-and-gas services company Nitro Fluids, which provides fracking services to oil and gas companies, on May 15 filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the Southern District of Texas in Victoria, facing a huge revenue decline that it blamed on industry consolidation.
Litigation can also be a burden for oil companies as petroleum products company Stanley Oil & Lubricants on Sept. 17 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of New York after a U.S. District Court judge granted one of the debtor's suppliers a preliminary injunction against it in a trademark and copyright infringement lawsuit, freezing certain assets and halting certain business activities.
PetroQuest Energy seeks sale in Chapter 11 bankruptcy
Oil and gas company PetroQuest Energy Inc. also had legal problems and filed for Chapter 11 protection for the second time in six years on Nov. 13 with plans to sell its assets as it faces severe liquidity issues.
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PetroQuest's legal problems developed after losing a court judgment in a breach of contract lawsuit in July 2024. The judgment required it to return an $11.5 million purchase price deposit for its East Texas assets and pay attorney fees, which it could not afford to pay, according to a declaration by CFO Angelle Perret.
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The Lafayette, La., based oil company and three affiliates filed their petition in the U.S. Bankruptcy Court for the District of Delaware listing $100,000 to $500,000 in assets and $100 million to $500 million in liabilities.
PetroQuest owes $104.4 million on a prepetition term loan agreement with a first priority lien on substantially all of the debtor's assets.
The company also owes $11 million in unsecured debt, which includes top creditors Patriot Natural Gas LLC, owed $4 million; Chevron USA Inc., owed $1.2 million; and the law firm Baker Botts LLP, owed $1 million.
PetroQuest seeks over $14 million DIP loan
PetroQuest will seek approval of up to $14.2 million in debtor-in-possession financing from its term loan lenders, which includes $1.695 million in new money and a rollup of $12.5 million in prepetition debt.
The debtor will seek court approval of bidding and sale procedures for its East Texas oil and gas assets in Panola County, Texas, as part of its reorganization plan.
PetroQuest by February 2024 had difficulty servicing its debt payments under its term-loan agreement. The company sought a buyer for its assets and received four bids by Sept. 4 but was unable to finalize a stalking-horse bid for its assets because of liquidity problems.
The debtor decided that a restructuring and sale of its assets under a Chapter 11 bankruptcy filing was its best option going forward.
PetroQuest, founded in 1998, focuses on the exploration, development, acquisition, and operation of oil and gas properties in Texas and Louisiana and in shallow offshore waters in the Gulf of Mexico.
The company's assets currently consist of oil and gas leases, producing properties, and related assets in Panola County, Texas, along with a few scattered properties in Oklahoma, Louisiana, and offshore.
The debtor filed for Chapter 11 protection the first time in late 2018, obtained confirmation of its reorganization plan and exited bankruptcy in February 2019.
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