O&G Bankruptcies threaten Midstream Sector
At least 41 NA Oil and Gas Producers have filed for bankruptcy since the beginning of 2015. At the end of last year bank regulators labeled $35 billion, or 15%, of outstanding loans to the sector as “substandard, doubtful, or loss.” Now, two producer bankruptcies threaten to impact the midstream sector as they seek to abrogate their gathering agreements. Sabine O&G argues that they can save over $35 MM by terminating their agreement with Cheniere and building their own system. This is somewhat reminiscent of the late 80’s when the natural gas pipeline industry was restructured after a spate of financial woes in that sector. One result was shorter term and more flexible gas pipeline transportation agreements. With the possibility of redundant gathering systems and lower revenue streams, post producer bankruptcy, will the midstream sector need to restructure?
Link to Forbes Article "Midstream MLPs Cringe As Bankruptcy Judge Mulls Rejecting Gathering Contract
CEO | Interim CEO/COO/CRO/GM | Advisor | Operating Partner l Board Member | Transformational Fixer I Growth & Change | Turnaround & Restucturing | Performance & Profit | Certified Turnaround Professional | American ????
8 年We can help. qorval.com
Managing Member at Prosumers Energy
8 年Agreed, that’s the key issue behind my question regarding the potential restructuring of the midstream business. In order to better serve producers, end users and investors increased flexibility in how production gathering and processing is financed and delivered, combined with enhanced risk management capabilities are potentially necessary components of a revamped operating model for the midstream industry.
Interesting. While bankruptcy/liquidation is an option, the real issue here is how we relaunch the US energy industry on lean and flexible principles that allow it to be the world's "Swing" producer, reacting quickly to market opportunities. The national oil companies are trapped, trying to drive revenue to support their domestic budgets and international aspirations. A tremendous need for an information-driven industry that can react quickly, forecast effectively and manage costs through variability. New finance models, new labor models, new operations models.