Bankrupt already. Whiting Petroleum Files for Bankruptcy Reorganization

[ffr]

Shares of Whiting Petroleum (WLL) - Get Report plunged Wednesday as the oil-and-gas fracker became the latest victim of cratering oil prices and filed for Chapter 11 bankruptcy.

Whiting has more than $585 million of cash on its balance sheet and will “continue to operate its business in the normal course without material disruption to its vendors, partners or employees,” the company said in a statement.

“Whiting currently expects to have sufficient liquidity to meet its financial obligations during the restructuring without the need for additional financing.”

Oil prices sank 66% in the third quarter, the largest drop since figures were available for 1983, according to Dow Jones. - The Street

Amazing! We're not a month into this reality and already the presidents industry of choice is cratering.

[unblock]

1. we're going to see a lot of voluntary reorganizations in the next few months.

it takes time before lower sales, slow customer payments, and debt due dates *force* a company into bankruptcy.

but many companies can easily predict much lower revenue in the coming months and see that, with their debt load, they're better off using bankruptcy law now to cram down some of their debt, rather than waiting for the inevitable, even if they have enough cash on hand to survive for a while.

this allows companies to negotiate longer, which may help them get a better deal than if they wait.


the oil business is particularly hard hit. not only would oil prices have gone down a lot anyway due to covid-19-related economic slowdown, but also the saudis have opened the spigots and flooded the market, further driving down prices to record lows.

[Amishman]

4. this and facing potential losses all over, creditors are probably extra willing to restructure

when the floor is threatening to drop out, the borrower has quite a bit of leverage to force better terms

[DenverJared]

2. This is inevitable

The world demand for oil has sunk drastically due to the pandemic and there is a glut. The cheap producers can afford to sell at $40/barrel but the frackers cannot.

[TreasonousBastard]

5. Lots of talk about Putin working with the Saudis to get lower prices...

even though the Saudis aren't thrilled with the idea.

Saudis and Russians can pump as low as 20 bucks a barrel, but the frackers can't frack that low. With large chunks of the US coastlines undrillable, it's only fracking that keeps our production up.

And unlike Saudis who can manage production to move prices up or down (or try to-- it doesn't work like it used to) fracking is too costly to play that game.

Wait for more belly up frackers.

[Amishman]

6. some frackers can make a profit as low as $30

most are under $40.

also keep in mind that a significant part of their production is not sold at the spot price and is tied into hedge contracts with buyers of crude oil.

The chart below is 2018 data, by all accounts costs are lower now.

Some weaker players will go under, especially those that were more bullish on price and over extended on risk. Their assets will get bought up by bigger, healthier players. Saudis need 70+ price to balance their budget, and they burned up almost half of their foreign reserves last time they tried to break the shale producers. Prices tanked even lower this time and I'm not convinced the Saudis can afford to wait this out, especially with Covid-19 killing demand. US Shale only has to cover their own expenses, Saudi Aramco essentially has to pay for a country.

?1550092927

[bronxiteforever]

7. +1 lots of bankruptcies coming for shale

Whiting Petroleum is the first high-profile bankruptcy in the shale patch and won't be the last.

Company after company will declare bankruptcy imminently and destroy shareholders once and for all.

Shale oil will not disappear, it will reemerge smaller, but in private hands.

Executives and private equity are about to steal the remaining value in the shale oil industry after years of skimming by executives.

https://seekingalpha.com/article/4336930-shale-oils-final-theft-from-shareholders

[SWBTATTReg]

3. Must be doing the 'trump' thing, that is, declaring bankrupcy again, when it was possible for ...

quite some time that low oil prices could flood the markets (and duh, no one thought that this could happen?).

To be honest w/ you, how in the world is Russia such a big threat, oil wise? Do they really have the infrastructure in place to export their oil like Saudi Arabia already does? I didn't think Russia really had the infrastructure in place (they do for gas, e.g., to heat homes in Europe, etc.) but oil itself?