Oil and gas company bankruptcy filings declined significantly in 2017 and 2018 compared with 2016, as the energy industry continues to recover from the recent downturn, according to the new Haynes and Boone Energy Roundup.

For law firms with energy clients, the recovery is good news as oil and gas companies emerging from bankruptcy focus on acquisitions and divestitures, attorneys say.

“These oil and gas companies, once they exit bankruptcy, they are ready to move. They like to move quickly, to acquire, buy assets, sell some of their noncore assets,” said Kraig Grahmann, a partner at Haynes and Boone in Houston.

“The transactional work has picked up,” he said.

According to Haynes and Boone’s Fall 2018 energy report, which was made public Wednesday, a total of 46 energy and exploration (E&P) companies filed for bankruptcy in 2017 and during the first eight months of 2018, compared with 70 filings during 2016. As of Aug. 31, 22 producers filed bankruptcy, valued at about $9 billion in secured and unsecured debt.

Haynes and Boone has tracked North American oil and gas bankruptcies since 2015, identifying a total of 160 E&P bankruptcies valued at $92.9 billion since then, including 71 filed in Texas, according to the report. The bankruptcies include Chapter 7, Chapter 11, Chapter 15 and Canadian cases.

Additionally, from 2015 through August 2018, a total of 172 oil field services companies filed for bankruptcy, with 88 filed in Texas, and only 24 midstream companies, with 10 filed in Texas.

Kraig Grahmann

Grahmann, who works on energy finance and oil and gas acquisitions and divestitures, said that while Texas firms may not handle all of the energy industry bankruptcies, they do get a big chunk of the deal work stemming from the reorganizations.

Bankruptcy filings declined in 2017 and 2018, compared with the previous two years, because the price of oil has improved. Prices are currently hovering around four-year highs. In addition, many of the companies with balance sheets that needed cleaning up have already been through bankruptcy.

Looking ahead to 2019, Grahmann anticipates a strong flow of acquisitions and divestitures as companies focus on developing their core business, and continued investment from private equity firms.

“The lending activity has certainly picked up as conditions have improved,” he said.

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