Paul Jansen: Delayed Reactions – Oil & Gas Investor
Paul Jansen wrote an article for Oil & Gas Investor titled “Delayed Reactions.”
More than 120 E&Ps filed for bankruptcy protection in the U.S. during 2016 and 2017, representing approximately $80 billion in liabilities. An important element of the bankruptcy process is the ability of companies to reject uneconomic and burdensome contracts, helping to correct the subject companies’ cost structure. These contract rejections have—and will continue to—affect oilfield service and midstream companies. Here are the effects of E&P bankruptcies on the energy supply chain and recommendations to better navigate the changing environment.
Specifically, two aspects of E&P restructurings are causing issues for supply companies: contract rejections and capex reductions. In a Chapter 11 bankruptcy, debtors have the ability under certain circumstances to reject executory contracts that are no longer providing value to the estate. Examples include leases, master service agreements, transportation and gathering agreements and other contracts where parties have not completed performance.