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Drop in oil and gas prices drives energy company into bankruptcy

Nearly all businesses in Salem may be subject to the fluctuations of the market, yet some may feel it much more than others. As consumer demand ebbs and flows, the hope is that those companies experiencing a crunch have the financial support needed to endure such times. However, if market predictions do not indicate a significant recovery on the horizon, these companies may be forced to seek bankruptcy protection to avoid being overwhelmed by their debts. In taking such action, businesses may be able to continue their existence through reorganization. However, such a move may only be possible after having shown its debtors (and for private companies, its shareholders) a recovery plan.

A $128 million loan is what a Pennsylvania-based energy company is hoping will get them back on a firm financial footing. In its recent Chapter 11 filing, the company, which deals primarily and oil and natural gas exploration as well as land management, listed the recent decline in oil and gas prices as the primary reason behind its struggles. Its shares recently closed at only 8 cents after having sold at as much as $5 less than a year ago. Now, it is seeking to discharge $1.2 billion in debt. While its bankruptcy case would cancel its existing shares, it has proposed a $50 million rights offering to its investors.

History has shown that markets will eventually recover. In the meantime, those businesses enduring a lean season may need all of the help they can get to survive. That help may come in the form of bankruptcy. Those business leaders looking to explore this option may do well by first consulting with a bankruptcy attorney.

Source: The Wall Street Journal “Penn Virginia Files for Chapter 11 Bankruptcy Protection” Stech, Katy, May 12, 2016

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