How to Avoid Bankruptcy as Oil Prices Fall
As discussed on yesterdays “What’d You Miss?” on Bloomberg Business, the drop in oil prices has led to an increasing amount of oil and gas companies facing undesirable circumstances. The recent fall in oil prices is significantly impacting already distressed companies trying to weather the storm. With oil prices down, private equity capital dried up, and the diminishing option to extend credit lines, how are oil and gas companies avoiding bankruptcy?
There are different ways oil and gas companies can survive this price drop. If a company is facing the heat, the first step is to look at its capital structure and available liquidity. Once a company has a complete understanding of its cash and liquidity, then it can begin to gage how long it can last trying to pursue out of court or other strategic options and avoid filing for bankruptcy.
Stalling bankruptcy is a complex and unpredictable endeavor. Restructuring is a viable option for an oil and gas company that has maintained a realistic assessment of its future. Restructuring can allow companies to continue to operate while maximizing future opportunities. As credit lines are shrinking and companies are desperate for cash, reorganizing financials or operations is a way to remain sustainable.
More and more companies are realizing the effects of the oil and gas market’s poor performance in 2015. Despite a small spike in oil prices this past June that provided some relief, the energy sector has experienced a tremendous loss. Bloomberg’s sources suggest it will be a rough road ahead for oil and gas companies. Even the most prominent oil and gas companies are feeling the pressure, and bankruptcy is a real looming threat for many smaller firms. Companies should utilize restructuring support from oil and gas consulting firms to withstand the fallout from the drop in oil prices.