U.S. shale driller Whiting Petroleum Corp. filed for bankruptcy protection yesterday, becoming the first sizable fracking company to succumb to the crash in oil prices, WSJ Pro Bankruptcy reported. Whiting’s bankruptcy filing comes as many U.S. oil drillers face pressure to meet hefty debt obligations they took out from banks and bondholders to make America into the world’s largest oil and gas producer, as U.S. benchmark crude prices drop to their lowest levels in nearly two decades. Oil prices are coming off their largest monthly drop ever as the coronavirus pandemic saps oil demand at the same time Saudi Arabia presses a price war against Russia by flooding global markets with crude. The price deterioration has pushed many U.S. shale companies to the brink of bankruptcy and upended efforts by those already in chapter 11 to restructure their operations. If the downturn persists, a number of U.S. drillers could default on more than $32 billion of high-yield debt over this year, with a projected default rate of 17 percent, according to credit-ratings firm Fitch Ratings. Before crude tanked, Fitch had forecast a 7 percent default rate for 2020. Last year, 41 U.S. oil companies filed for bankruptcy protection in cases involving $11.7 billion in debt, according to Dallas law firm Haynes & Boone.Denver-based Whiting, one of the largest drillers in North Dakota’s Bakken Shale, had come under financial pressure even before U.S. crude prices collapsed. Chief Executive Brad Holly said the company’s proposed restructuring was its “best path forward” given uncertainty about how long the Saudi-Russia price war and the coronavirus pandemic would go on. Whiting foreshadowed its bankruptcy by taking steps on Friday to protect $3.4 billion in net operating losses, which are potentially valuable tax assets that could be used to reduce future federal taxes. The company also drew down $650 million from its loan facility last week to generate cash and won’t make a $262 million debt payment that comes due Wednesday. The maturing bond has lost more than 90 percent of its value since mid-February, according to MarketAxess, and closed at 6 cents on the dollar yesterday. Read more.
In related news, Crude oil futures jumped 10 percent today after U.S. President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war, Reuters reported. Brent crude futures rose more than 11 percent in early trade. Trump said that he had talked recently with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal to end their price war within a “few days” — lowering production and bringing prices back up. Trump also said that he had invited U.S. oil executives to the White House to discuss ways to help the industry “ravaged” by slumping energy demand during the coronavirus outbreak and the Saudi Arabia/Russia price war. Read more.
