The current oil and gas “bust” has raised a number of issues that counsel to creditors of distressed oil and gas exploration and production (“E&P”) companies must be aware of, particularly as E&P companies are shedding assets, seeking forbearance agreements from creditors, and filing chapter 11 bankruptcy. E&P companies have always been prime candidates for chapter 11 bankruptcy for a number of reasons, including, but not limited to the cyclical commodity prices ($27 bbl oil or $2.00 kl gas will shake the financial foundations of even the proven E&P companies); the high cost of exploring and producing oil and gas; taking on too much debt; and the lure of high returns while overexposing the company to high levels of risk. These factors have led to a slew of chapter 11 filings by E&P companies in the past months, a trend that is expected to continue for the foreseeable future.
