The sustained decline of oil prices could mean tough times are ahead for many companies. Industry experts are expressing particular concern for smaller exploration and production companies that often rely on debt financing to continue operations.
A recent article in Investopedia examined several oil companies at risk for declaring bankruptcy:
Energy XXI, Ltd. (EXXI)
Swift Energy Co (SFY)
Comstock Resources Inc. (CRK)
Ithaca Energy Inc. (IAE.TO)
Ocean Rig UDW Inc. (ORGIN)
Goodrich Petroleum Corp (GDP)
EV Energy Partners LP (EVEP)
The problems these companies face include leverage ratios, liquidity problems and negative free cash flow. Companies with heavy debt burdens and persistent negative cash flow will struggle to refinance and repay what they owe. Equally as worrisome is the lack of liquidity. If the market conditions and oil prices do not improve these companies are at risk for default and bankruptcy.
The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
Oil and gas investments are speculative and often carry a high degree of risk. As such, they are not suitable for most investors. If you have concerns regarding an oil and gas investment and would like to speak with a securities attorney, please call The White Law Group at (312)238-9650.
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