Stung by Low Oil Prices, Companies Face a Reckoning on Debts

By CLIFFORD KRAUSS and MICHAEL CORKERY, NYT
FEB. 9, 2016

MIDLAND, Tex. — On the 15th floor of an office tower in Midland looms a five-foot-long trophy black bear, shot by the son of an executive at Caza Oil & Gas.

But it is Caza that has recently fallen prey to a different kind of predator stalking the Texas oil patch: too much debt.

While crude prices have dropped more than 70 percent over the last 20 months, a reckoning in the nation’s vast oil industry has only just begun. Until recently, companies were able to ride out the slump using hedges to sell their oil for higher than the low market prices.

In recent months, however, most of those hedges expired, leaving a number of oil companies low on cash and unable to pay their debt. More broadly, energy executives and their lenders are realizing that a recovery in oil prices is at least a year away, too long for many companies to hold out.

Energy executives and their bankers are bracing for a prolonged downturn that could remake the energy industry in a way not seen since the turmoil of the late 1990s gave rise to mega-mergers like Exxon Mobil.

(More here.)