USA: Linn Energy and Penn Virginia Corporation file for Chapter 11

Bankruptcy
Source: DollarPhotoClub

Creditsafe USA,  the world’s most used supplier of company business intelligence, today reports two significant bankruptcies in the oil and gas sector: Linn Energy and Penn Virginia Corporation. Within the past 24-hours, both companies have filed for Chapter 11 bankruptcy.

“It is truly shocking that in the past 24-hours, two major players in one of the world’s largest global industries have filed for Chapter 11.  Both Linn Energy and Penn Virginia Corp., were powerhouses and considered to be trailblazers by industry observers.  With these developments, lenders and creditors need to exercise immense caution when considering transactions with other companies in the oil and gas arena,” said Matthew Debbage, CEO, Creditsafe USA and Asia.

Linn Energy, founded in 2003 and registered in Texas, became a public company in 2006. Over the years, the company employed aggressive financial strategies resulting in moderate growth. With the sharp decline in crude-oil prices, this highly leveraged company is one of two big industry players forced into Chapter 11. According to company reports, Linn Energy was unable to meet its $10 billion in debt obligations, making it one of the largest oil and gas bankruptcies since the collapse of the industry in the 1980s.

Linn Energy has been steadily losing money over the past several years with a profit before tax in 2013 of negative $691million, negative $452 million in 2014, and negative $4.76 billion by 2015. These accumulated losses decimated the Company’s reserves. In 2013, the net value of Linn Energy was $5.9 billion, however, the accumulated trading losses meant the net value of the Linn Energy in 2015 was actually negative $269m. Essentially, Linn Energy lost more $6 billion in value from its balance sheet.

Penn Virginia Corporation is an independent oil and gas company engaged in the exploration, development and production of oil, NGLs and natural gas in various domestic onshore regions of the United States, with a primary focus in the Eagle Ford Shale of south Texas.

Today, Penn Virginia Corporation and eight affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Eastern District of Virginia. The filing was made to facilitate the deleveraging of the Company’s consolidated balance sheet through a prearranged restructuring that will reduce its long-term debt by more than $1 billion. Penn Virginia entered into a restructuring support agreement with holders of 87% (or $1.03 billion) of its nearly $1.2 billion in total funded-debt obligations.

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