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Roughly 100 North American oil and gas companies have filed for bankruptcy since the start of a two-year oil price rout, and the industry may be only halfway done, according to restructuring specialists.
The crude glut has persisted longer than many thought, and the prolonged oversupply has kept prices stuck in the $40 to $50 range for much of the year. U.S.-traded West Texas Intermediate crude jumped more than 5 percent on Wednesday after OPEC reportedly reached a deal to limit production, but by and large, there has been little reprieve for drillers and service companies on the edge.
In its latest forecast, the International Energy Agency said the crude market will take longer to rebalance than it previously thought.
All this comes as oil hedges have rolled off, leaving many exploration and production companies exposed to low prices. Earlier in the cycle, hedging allowed producers to sell their product at a higher price they'd locked in before crude tanked.
Now, that exposure may help push more drillers into bankruptcy court, said Bill Rhea, a consultant at J.W. Rhea & Associates.
"I think we've got easily another 12 to 18 months, and we could see as many filed bankruptcies from here on out as have (already) filed in the upstream sector," Rhea told CNBC.
Patrick Hughes, a Denver-based partner at law firm Haynes and Boone, also believes the bankruptcy cycle is far from drawing to a close. Hughes said he worries that oil prices will remain suppressed because drillers have built up a backlog of drilled but uncompleted wells, which allow them to ramp up production when oil prices rise.
That production could cap oil price gains and ultimately pressure groups of energy sector creditors to stop kicking the can down the road and come to a decision on long distressed drillers in which they've invested.
"If there's not a complete 100 percent agreement, the only way you can solve those problems is through the bankruptcy process," he said.
"There's going to have to be more filings just because there's no price out there that's foreseeable that's going to bail these companies out," he added.
Banks and other regulated institutions face scheduled reviews during which regulators can pressure them to cut drillers' credit lines if falling oil prices continue to drag down the value of their oil reserves. Those reserves serve as collateral against loans.
The fall review of energy firms' borrowing ability will begin soon. Oil and gas exploration companies largely fund operations with debt. Slashing their credit lines could push more drillers into insolvency.
Lenders not subject to those regulations may still face calls from their investors to exercise their right to extract value from their investment in energy debt, said Hughes. Or they may simply determine the time has come to swap debt for equity, a popular strategy that allows drillers to clean up their balance sheets and lets some debtors wait out the rebound in oil prices as stockholders.
That marks a change from bankruptcies earlier in the cycle, said Elizabeth Green, a bankruptcy attorney at BakerHostetler.
"Those restructuring really had the lenders trying to hold on to as much debt as possible, not realizing this would last as long as it has," she said. Some of those companies may not have taken adequate enough measures in their initial restructuring, and my find themselves in bankruptcy court once again.
Oilfield services companies in particular may be poised for restructuring. These firms have been battered not only by reduced demand for their services, but by the deep discounts they've had to offer drillers.
When oil prices recover, exploration and production firms may not be keen to work with services companies who are teetering on the edge, so some services firms may undergo restructuring to clean up their balance sheets in anticipation of a better market, Green said.
"If they can go in and adjust their balance sheet and come out and be able to perform services at a higher price, they will be extremely profitable," she explained.
However, the persistently challenging environment is likely to contribute to a wave of consolidation, with larger companies like Schlumberger, Halliburton and Baker Hughes buying out smaller firms, she added.