The economic toll triggered by the COVID-19 pandemic has once again had its casualty. Arena Energy is the latest large offshore oil and gas company to file bankruptcy protection. The Woodland driller has attributed the filling to years of low crude prices, a situation made dire by prices plunging early in the year to record lows.
Oil prices have struggled to rise past the $40 a barrel level as demand continues to edge lower amid reduced movements around the world attributed to the havoc causing COVID-19 pandemic. Regulatory filings indicate the company intends to sell all of its assets to private equity firm Lime Rock Partners in a deal that includes $64.2 million in cash.
The filling comes hot on the heels of the oil and gas company struggling to cut down its more than $1 billion in outstanding funding debt. With oil prices showing no signs of ticking higher, the company’s future had become bleak in the hard-hit sector.
Oil Prices Slump Impact
Arena Energy’s situation attests to the dire situation in the ones booming and lucrative business. More than 50 oil and gas companies have already filed for bankruptcy. The fillings come on the backdrop of oil price plunging below the negative territory in March. While prices have bounce back, they are yet to reach levels that will allow companies to generate some profits, let alone break even.
Exploration and production companies have been the hardest hit on oil prices, failing to raise the past $50 a barrel level. The companies are struggling with debt in the highs of $49 billion nearly twice the debt held in the energy bankruptcy filers.
While some companies have moved to slash operation costs through layoffs and suspensions of drilling operations, others are yet to enjoy the benefits of such cuts. Filling for bankruptcy has turned to be the way out as uncertainty continues to grip the drilling business; California Resources and Denbury Resources have already filed for bankruptcy protection following in the footsteps of Chesapeake Energy.