Although oil prices have recently experienced a spike and seem to be steadily higher than the worryingly low prices of under $27 a barrel, it seems that the effects of the cost of oil in the last year has become all too much for Chaparral Energy, who filed for chapter 11 bankruptcy protection on Monday 9th May.
Chaparral Energy, based in Oklahoma City, is a major oil and gas drilling company that was particularly noted for its work in the Mid-Continent region. Chaparral was responsible for producing over 1 billion barrels of oil equivalent and employing just under 400 professionals. The company was once recognised as a “true Mid-Continent” leader, thanks to its impressive and stable oil assets.
There has been a huge increase in numbers of North American companies filing for bankruptcy over the past 16 months, which can be seen in the graph below:
We can see a huge spike in bankruptcy filings since January 2015, proving that it’s a tough game of survival for oil companies even at present, when oil prices seem to be steadily improving. But shouldn’t this be expected, with the price of oil plummeting from $110 a barrel to under $27? Although the recent increase has created a sense of hope for the industry, the industry is still on a gruesome road to recovery.
According to Haynes and Boone, an American corporate law firm, their records show 69 North American oil and gas producers have filed for bankruptcy since January 2015, which is astronomical. This doesn’t include the large number of companies that have requested any other level of court protection.
Unfortunately, the increase of oil prices in the last two months, although promising, is not what it was at over $100 a barrel. It will be interesting to see if this increase will have any positive effects on oil companies in the next 6 months, after the hit these companies have been facing in 2015 and the early months of 2016. What is important to remember, is that it could be worse: as proved in the first few months of this year. There a few fundamental things currently balancing the oil price. Where the recent fire near Canada’s main oil hub has been ongoing since last week, cutting off roughly 645,000 barrels of production a day (25% of the country’s overall output), there have been increases on oil production from companies such as Saudi Aramco in Saudi that is levelling the supply hit from Canada.
Chaparral Energy will continue its operations while the process is taking place without any interruption and are currently in the middle of gaining permission to continue paying employees and shareholders without conflict.
Looking for a new role in the Oil & Gas industry? Search our latest Oil & Gas jobs today!