Interest Expense and Signs of Distress

With one-sixth of major independent oil and gas producers facing debt payments that are more than 20 percent of their revenue, austerity has replaced the swagger that characterized the earliest days of the oil bust. Contracts that locked in higher prices are expiring, leading banks to reduce credit lines in coming months. Drillers caught in the squeeze may be forced to auction off some of their best holdings to raise cash or accept more expensive financing to avoid bankruptcy, according to more than a dozen bankers, lawyers and company officials who specialize in energy deals.

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Permalink Reply by Skip Peel - Mineral Consultant on September 10, 2015 at 6:07

Some energy companies may not have assets viewed as worth acquiring.  IMO several on this list are in that category.

Permalink Reply by S.H.M. on September 10, 2015 at 9:41

Skip, if our company is on that list and is headed for insolvency we should head to the lawyer to get our lease out of their (and potential buyers) hands?? Renegotiate with potential new owners?

Permalink Reply by Skip Peel - Mineral Consultant on September 10, 2015 at 9:49

No need to take any action until your operator files.  I have been advising my clients to discuss sharing legal costs with family and neighbors whose leases may also be at risk.  If you don't have a relationship with an experienced O&G attorney, you might seek a referral.  Once those things are done you can move expeditiously if you need to. I hope you don't have to but it's better to be prepared.

Permalink Reply by S.H.M. on September 11, 2015 at 8:14

Thanks!! Our leases are not Haynesville, but I don't want to lose a change to get those interests back.

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