Oil drillers counting on prices to remain stable through the summer had their hopes dashed as the second half of the year kicked off with a weeklong rout that has erased crude's gains for 2015.
Upstream oil companies had been on track to get a boost to their balance sheets as crude prices regained ground in the first quarter and stabilized in the second. But with banks set to reassess the oil patch in September, U.S. crude tumbled 7.7 percent on Monday as oversupply concerns tipped the scales and traders sold off long positions.
Crude prices had taken a pause throughout May and June, with U.S. benchmark West Texas Intermediate consolidating around $60 per barrel. It settled at $52.53 on Monday.
Read More Oil crushed by worries on Europe, Iran
To measure their health, banks average out the value of producers' reserves over the previous four quarters. Producers with weak balance sheets and heavy debt loads were depending on higher prices going into the September rerating period. As commodity prices fall, so does the value of producers' portfolios. The banks will cut the amount of money firms can borrow based on those lower valuations.
Small- and mid-cap energy companies had grown relatively optimistic as U.S. crude stabilized, said Bill Costello, energy and utility analyst and portfolio manager at Westwood Funds.
Costello expects banks to reduce drillers' borrowing bases by 15 to 20 percent after the determination period in September. Many producers will be able to shoulder that burden, but those with debt loads equal to four times their earnings or more will likely struggle, he said.
Westwood pruned its portfolio at the end of 2014, holding onto names with strong balance sheets that were able to extend their debt payments by four to five years, including RSP Permian, Bonanza Creek Energy and Synergy Resources. The fund sold off shares in those with heavier debt loads, including Rex Energy and Oasis Petroleum, both of which are sharply lower this week.
Exploration and production firms with debt coming due soon will likely run into problems, Costello said. "Even 2017 doesn't give you as much breathing room as you would probably like."
If a bank finds a driller's assets are less valuable than the driller's outstanding debt, the energy producers will be forced to come up with a way to cover the gap between their reserve value and debt load. That may include asset sales and debt restructuring.
Kim Brady, partner at private equity firm Solic Capital, told CNBC that he expects up to 13 publicly traded exploration and production companies to file for bankruptcy in the next year, in part because he believes stubbornly high U.S. production will continue to weigh on oil prices and undercut asset values.
"I don't think the price is going to go up from this point," Brady told CNBC. "It's going to come down to the lower $50s until you can really see that there's traction and production is down."
Last week, the U.S. Energy Information Administration reported that U.S. crude production increased by 9,000 barrels a day to 9.7 million, the highest level since 1971. The EIA said last week that it believes production began to decline in June.
Market watchers were also focused on negotiations between Iran and six world powers over Tehran's nuclear program. A deal would pave the way for Iran to export its oil.
Crude futures first broke through their two-month trading range Wednesday after an Iranian diplomat said technical experts had completed the draft of a deal. The same day, the EIA reported the first rise in U.S. oil inventories since April.
Kevin Book, managing director at CV Energy Partners, put the chances of Iran reaching a deal with the so-called P5+1 group of nations at 80 percent in an interview with "Squawk Box" on Monday. Should that happen, oil prices will likely remain weak through the middle of 2016, he said.
Capping off the shortened holiday week of bearish news, oilfield services firm Baker Hughes reported Thursday that producers increased the number of rigs drilling for oil on U.S. land for the first time since Dec. 12.
Two recent equity offerings show that some energy firms are now on the offensive, raising cash in order to accelerate production rather than pay down debt, Citi Research said in a note.
Investors' appetite for new equity has allowed some drillers to put off asset sales and mergers. Nearly 40 exploration and production companies have raised a total of $17.3 billion in equity in 2015, including IPOs and secondary stock and convertible bond offerings, according to Dealogic.
Energon and Cimarex Energy both raised cash in the last two months with an eye toward increasing production, primarily in Texas's prolific Permian Basin, Citi noted. But the companies also indicated they would deploy the proceeds during the second half primarily to drill but not necessarily to complete producing wells.
"Our sense is that some (exploration and production firms) believe that incremental 2015 production growth may not be fully rewarded in the current environment and therefore have made an earlier turn toward ensuring a good setup for 2016," Citi said.