Eyeing upswing, more U.S. oilfield service firms restructure

Companies that drill wells, haul water and provide other services to energy exploration firms have been waiting out a slump in oil prices by idling machinery, laying off workers and extending deadlines for repaying debts.

Now they are turning to Chapter 11 creditor protection to shed debt and raise cash so they can spend and invest again.

Without bankruptcy, many of small and medium-sized service companies risk missing out on any upturn that could follow President-elect Donald Trump''s pro-drilling agenda or OPEC''s plan to cut oil production for the first time in eight years, restructuring advisors said.

“You''ve got some zombie companies out there,” said Jay Krasoff, a managing director with Chiron Financial in Houston. “You have to give counterparties ­confidence you''ll be in business to do their work. That''s what''s going on.”

Through the end of October, about 70 mostly private energy service companies have filed for Chapter 11 this year, up from 39 in all of 2015, according to Haynes & Boone, a law firm that specializes in energy restructuring.

As the pace of filings accelerates, the size of companies restructuring in bankruptcy is also increasing.

In June through October, nine companies with at least US$100 million in debt filed for Chapter 11, with a total of US$9 billion in liabilities, according to Haynes & Boone. That exceeded the total for the prior 18 months, which came to US$8.2 billion in debt from seven filings with at least US$100 million in debt.

In all, energy service companies have restructured about US$18.7 billion in bankruptcy. By comparison, the 20 companies in the Dow

Jones U.S. Oil Equipment & Services Index .DJUSOI have a combined US$82.6 billion in debt, according to Thomson Reuters data. - Nampa/Reuters