Several oil and gas service businesses in Louisiana have filed for bankruptcy protection in recent weeks amid an economic downturn spurred by the coronavirus pandemic and low crude oil prices.
Two businesses near Lafayette, one in Houma and another in Kenner filed for bankruptcy, all of which appear to be oil and gas services companies. Dozens more Louisiana businesses are owed money by the companies filing for bankruptcy, records show.
In recent weeks, the Louisiana Oil and Gas Association has said about half its 460 member companies have told the organization that bankruptcy was on the table as an option to survive the economic downturn.
Hundreds of wells in Louisiana have been shut-in since the coronavirus pandemic began. Wells are shut in for various reasons, one of which could be lack of production. Operators aren't required by the state to disclose why the decision was made.
Crude oil futures briefly fell below $0 several weeks ago as demand for fuels plummeted amid stay-at-home orders across the globe to control the spread of the coronavirus. Storage became an issue for a glut of oil on the market. With some countries agreeing since then to limit oil production and world economies gradually reopening, the price of U.S. benchmark oil has rebounded about 20% in the past 30 days to about $40 per barrel.
However, experts say $55 to $65 per barrel is needed by U.S. producers.
In early June, there were fewer than 300 oil rigs running across the U.S., the lowest in recent history. During the most dire point of the 2014 to 2016 oil bust, there were still about 400 rigs operating. If there's less oil and gas extraction, there's less demand for related services — the majority of Louisiana companies tied to the oil and gas sector.
"We are going to get hit hard," said Gifford Briggs, president of the Louisiana Oil and Gas Association. "If you're not drilling wells, it doesn't matter what kind of debt you have, there's not enough business."
Once the market recovers, it may be a while for demand to bounce back since companies are deferring or canceling major investments, he said.
"We're competing with what little activity there is, which is mostly in Texas," he said.
Some of the organization's members have concerns about what happens when existing work dries up at the end of the year.
"They said, 'We've got some work to finish out 2020, but we have nothing in 2021," Briggs said. "That V-shaped recovery is not going to happen."
None of the companies filing in recent weeks had filed for bankruptcy before, despite the significant downturn in the industry in 2016.
- In Carenco, Professional Pumping Services LLC filed for Chapter 7 bankruptcy, a liquidation of the business and auction of assets to pay off any debts. The Lafayette-area pumping services business has fewer than 100 creditors. It had $3.5 million in assets, much of which was specialty equipment, with only $756,139 in liabilities. Typically debt outweighs assets in a bankruptcy case. A significant slice of unsecured creditors were employees of the company owed unpaid wages.
Broussard-based C&B Sales and Services is owed more than $66,150 as an unsecured creditor of Professional Pumping Services; Lafayette-based Deep South Chemical is owed $17,124; and Belle Chasse-based River Rental Tools is owed $37,169.
The owner of Professional Pumping Services did not respond to requests for comment.
- Franklin-based SMI Companies Global Inc. filed for Chapter 11 bankruptcy, which means the company seeks to reorganize debt and continue doing business. The company has fewer than 100 creditors, but it owes more than $1.5 million with less than $21,000 in assets.
Lafayette-based Aluminum & Stainless Inc. is owed more than $31,200; Gonsolulin Engineering in New Iberia is owed $29,000; Lafayette Paint & Supply Inc. is owed $18,155; and Broussard-based NI Welding Supply is owed more than $102,780, records show.
Calls for comment to the CEO of SMI Companies Global were not returned.
- Chester J. Marine LLC, based in Houma, filed for Chapter 11 bankruptcy seeking to reorganize the business. It has fewer than 50 creditors and more than $1 million in assets with less than $400,000 in liabilities.
Randolph Morgan Welding Service in Patterson is owed more than $126,100 and Workboat Electrical Services in Houma is owed $86,466.
Chester J. Marine's CEO declined to comment when reached by phone.
- Regional Valve Corp. in Kenner filed for Chapter 11 bankruptcy. It also has fewer than 50 creditors, which are owed more than $1.2 million. The company has less than $1 million in assets.
The largest unsecured creditors for Regional Valve Corp. included several business loans from $100,000 due to LoanMe and other alternative lenders such as more than $100,000 to Green Note Capital, another $18,600 to FundWorks LLC and an $80,000 line of credit from On Deck.
The company declined comment.
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