Wall Street has been a bit rocky lately — and things may get rockier still for those who are heavily invested in the oil and gas industries.
At least 26 United States energy producers have already filed for bankruptcy protection this year. Their combined debts total $10.96 billion. By comparison, only 28 energy companies filed for bankruptcy in all of 2018. Even fewer filed in 2017.
The bankruptcies are essentially occurring because many companies and investors took a gamble on the “shale revolution,” thinking that oil prices would rise. The gamble hasn’t paid off, and quite a few of those energy companies have landed in the “junk bond” category. One company, Halcon, has been forced to file for bankruptcy for the second time in three years.
New investors are hard to find as the price of oil continues to stay low. Natural gas prices have been extremely low, as well, forcing some companies to cap their wells or pay pipeline operators to take the gas.
The good news — for investors and creditors alike — is that most of the companies are filing for Chapter 11. That means that the bankrupt companies are asking the court for a planned restructuring of their existing debt while they work out new ways of bringing in income. Only a few companies are expected to file for liquidation (Chapter 7).
This is an important reminder to all struggling business owners out there. Markets can be unpredictable and unexpected advances or changes can suddenly make what looked like a “sure bet” an absolute bust. Going out of business is not always your only option. A Chapter 11 bankruptcy can often help you turn things around.