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Tracking the Growing Wave of Oil & Gas Bankruptcies in 2020

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3 years ago

July 24, 2020

Omri Wallach

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The Growing Wave of Oil & Gas Bankruptcies in 2020

2020 hasn’t been kind to the energy sector, and a growing wave of energy bankruptcies has started to build.

After a difficult year marred by rising geopolitical tensions in the Middle East and crude prices in the $50-60 per barrel range, analysts warned that the energy sector needed a strong recovery to offset a rising (and expiring) mountain of debt.

Instead, the oil patch has seen one bombshell after another, and the impacts are adding up.

Fueling the Wave’s Growth

The new year opened with a U.S. attack on a top-ranking Iranian general in Baghdad, followed by an Iranian counterattack on two bases in Iraq that hosted U.S. military personnel.

Then, the energy industry worried that the Organization of the Petroleum Exporting Countries (OPEC) wouldn’t renew its production deal with non-member countries, causing increased production and negative pressure on crude prices.

All the while, the threat of COVID-19 grew and started to spread. In March, the new coronavirus hit markets hardest, right as the OPEC+ deal collapsed. Russia and Saudi Arabia subsequently flooded the markets with cheap oil, starting a price war to drive out competition.

What developed was the perfect storm of nonexistent demand matched up against oversupply. Crude prices plummeted and hit a historic sub-zero low on April 20th, with futures for West Texas Intermediate (WTI) Crude closing at -$37.63.

The Wave’s Initial Damage

Now, following a renewed OPEC+ deal limiting production agreed upon on April 9th and slowly restarting economies driving up crude demand, prices have started to tick up.

Unfortunately, the damage has already been done and will take a long time to recover. By charting the sector’s bankruptcies over the first half of 2020—tracked by law firm Haynes and Boone, LLP for the U.S. and Insolvency Insider for Canada—we can see the wave start to swell:

Company Type	Q1 Bankruptcies	Q2 Bankruptcies	Total (H1 2020)
Oil & Gas Producer	7	18	25
Oilfield Services	7	12	19
Midstream Services	2	1	3
Total	16	31	47

For oil and gas producers, the second quarter of 2020 saw 18 bankruptcies, the highest quarterly total since 2016.

So far, they’re largely centered in the U.S., which saw a boom of surface-level shale oil production in the 2010’s to take advantage of rising crude prices. As prices have dropped, many heavily leveraged companies have started to run out of options.

Company Type	Q1 Total Debt	Q2 Total Debt	Total (H1 2020)
Oil & Gas Producer	$1.4 billion	$29.2 billion	$30.7 billion
Oilfield Services	$10.8 billion	$13.2 billion	$24 billion
Midstream Services	$0.2 billion	$0.2 billion	$0.5 billion
Total	$12.5 billion	$42.7 billion	$55.1 billion

The biggest victim in the first half of 2020 was Chesapeake Energy, a shale giant that declared bankruptcy on June 28 with more than $9 billion in debt.

Canada has also seen an uptick in energy bankruptcies, especially after facing years of stiff competition from U.S. shale producers. However, the number of cases in Canada is far fewer than in the United States.

One reason is that companies staved off bankruptcy or receivership in four of the seven insolvency cases in Canada since January 2020, at least temporarily. Instead, they are seeking protection under the country’s Companies’ Creditors Arrangement Act, giving them a chance to restructure and avoid insolvency.

A Prolonged Fallout

Another reason for the discrepancy in bankruptcy numbers is timing. The energy sector faced its biggest challenges in 2015/2016, causing many companies to take on debt.

Unfortunately, much of that debt is starting to expire, or becoming too difficult to pay off in the current market conditions.

That’s why, despite the wave of bankruptcies caused by COVID-19 gaining steam, the wave will continue well into 2020 and likely beyond.

July has already seen more companies declaring bankruptcy or seeking creditor protection. The question is, how many more are waiting to surface?

Related Topics:energy Gas timeline US bankruptcies bankrupt canada north america oil oil & gas

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Mapped: The State of Economic Freedom in 2023

How free are people to control their own labor, property, and finances? This map reveals the state of economic freedom globally.

Published

2 days ago

June 6, 2023

Avery Koop

Mapped: The State of Economic Freedom in 2023

The concept of economic freedom serves as a vital framework for evaluating the extent to which individuals and businesses have the freedom to make economic decisions. In countries with low economic freedom, governments exert coercion and constraints on liberties, restricting choice for individuals and businesses, which can ultimately hinder prosperity.

The map above uses the annual Index of Economic Freedom from the Heritage Foundation to showcase the level of economic freedom in every country worldwide on a scale of 0-100, looking at factors like property rights, tax burdens, labor freedom, and so on.

The ranking categorizing scores of 80+ as free economies, 70-79.9 as mostly free, 60-69.9 as moderately free, 50-59.9 as mostly unfree, and 0-49.9 as repressed.

Measuring Economic Freedom

This ranking uses four broad categories with three key indicators each, both qualitative and quantitative, to measure economic freedom.

Rule of law: property rights, judicial effectiveness, government integrity
Size of government: tax burdens, fiscal health, government spending
Regulatory efficiency: labor freedom, monetary freedom, business freedom
Open markets: financial freedom, trade freedom, investment freedom

The 12 indicators are weighted equally and scored from 0-100. The overall score is then determined from the average of the 12 indicators.

Here’s a closer look at every country’s score:

Rank	Country	2023 Score
#1	🇸🇬 Singapore	83.9
#2	🇨🇭 Switzerland	83.8
#3	🇮🇪 Ireland	82.0
#4	🇹🇼 Taiwan	80.7
#5	🇳🇿 New Zealand	78.9
#6	🇪🇪 Estonia	78.6
#7	🇱🇺 Luxembourg	78.4
#8	🇳🇱 Netherlands	78.0
#9	🇩🇰 Denmark	77.6
#10	🇸🇪 Sweden	77.5
#11	🇫🇮 Finland	77.1
#12	🇳🇴 Norway	76.9
#13	🇦🇺 Australia	74.8
#14	🇩🇪 Germany	73.7
#15	🇰🇷 South Korea	73.7
#16	🇨🇦 Canada	73.7
#17	🇱🇻 Latvia	72.8
#18	🇨🇾 Cyprus	72.3
#19	🇮🇸 Iceland	72.2
#20	🇱🇹 Lithuania	72.2
#21	🇨🇿 Czechia	71.9
#22	🇨🇱 Chile	71.1
#23	🇦🇹 Austria	71.1
#24	🇦🇪 United Arab Emirates	70.9
#25	🇺🇸 United States	70.6
#26	🇲🇺 Mauritius	70.6
#27	🇺🇾 Uruguay	70.2
#28	🇬🇧 United Kingdom	69.9
#29	🇧🇧 Barbados	69.8
#30	🇵🇹 Portugal	69.5
#31	🇯🇵 Japan	69.3
#32	🇧🇬 Bulgaria	69.3
#33	🇸🇰 Slovakia	69.0
#34	🇮🇱 Israel	68.9
#35	🇬🇪 Georgia	68.7
#36	🇶🇦 Qatar	68.6
#37	🇸🇮 Slovenia	68.5
#38	🇼🇸 Samoa	68.3
#39	🇯🇲 Jamaica	68.1
#40	🇵🇱 Poland	67.7
#41	🇲🇹 Malta	67.5
#42	🇲🇾 Malaysia	67.3
#43	🇧🇪 Belgium	67.1
#44	🇵🇪 Peru	66.5
#45	🇨🇷 Costa Rica	66.5
#46	🇭🇷 Croatia	66.4
#47	🇨🇻 Cabo Verde	65.8
#48	🇧🇳 Brunei Darussalam	65.7
#49	🇦🇱 Albania	65.3
#50	🇦🇲 Armenia	65.1
#51	🇪🇸 Spain	65.0
#52	🇧🇼 Botswana	64.9
#53	🇷🇴 Romania	64.5
#54	🇭🇺 Hungary	64.1
#55	🇵🇦 Panama	63.8
#56	🇲🇰 North Macedonia	63.7
#57	🇫🇷 France	63.6
#58	🇷🇸 Serbia	63.5
#59	🇻🇨 Saint Vincent and the Grenadines	63.5
#60	🇮🇩 Indonesia	63.5
#61	🇲🇽 Mexico	63.2
#62	🇨🇴 Colombia	63.1
#63	🇧🇦 Bosnia and Herzegovina	62.9
#64	🇬🇹 Guatemala	62.7
#65	🇩🇴 Dominican Republic	62.6
#66	🇧🇸 The Bahamas	62.6
#67	🇫🇲 Micronesia	62.6
#68	🇧🇭 Bahrain	62.5
#69	🇮🇹 Italy	62.3
#70	🇻🇺 Vanuatu	62.1
#71	🇰🇿 Kazakhstan	62.1
#72	🇻🇳 Vietnam	61.8
#73	🇲🇳 Mongolia	61.7
#74	🇸🇹 São Tomé and Príncipe	61.5
#75	🇦🇿 Azerbaijan	61.4
#76	🇵🇾 Paraguay	61.0
#77	🇲🇪 Montenegro	60.9
#78	🇽🇰 Kosovo	60.7
#79	🇱🇨 Saint Lucia	60.7
#80	🇹🇭 Thailand	60.6
#81	🇨🇮 Côte d'Ivoire	60.4
#82	🇹🇴 Tonga	60.0
#83	🇹🇿 Tanzania	60.0
#84	🇧🇯 Benin	59.8
#85	🇧🇿 Belize	59.8
#86	🇩🇲 Dominica	59.7
#87	🇸🇨 Seychelles	59.5
#88	🇹🇹 Trinidad and Tobago	59.5
#89	🇵🇭 Philippines	59.3
#90	🇧🇹 Bhutan	59.0
#91	🇲🇬 Madagascar	58.9
#92	🇰🇮 Kiribati	58.8
#93	🇯🇴 Jordan	58.8
#94	🇭🇳 Honduras	58.7
#95	🇴🇲 Oman	58.5
#96	🇲🇩 Moldova	58.5
#97	🇲🇦 Morocco	58.4
#98	🇸🇦 Saudi Arabia	58.3
#99	🇬🇭 Ghana	58.0
#100	🇫🇯 Fiji	58.0
#101	🇬🇲 The Gambia	57.9
#102	🇳🇦 Namibia	57.7
#103	🇸🇳 Senegal	57.7
#104	🇹🇷 Türkiye	56.9
#105	🇬🇾 Guyana	56.9
#106	🇬🇷 Greece	56.9
#107	🇸🇧 Solomon Islands	56.9
#108	🇰🇼 Kuwait	56.7
#109	🇺🇿 Uzbekistan	56.5
#110	🇰🇭 Cambodia	56.5
#111	🇧🇫 Burkina Faso	56.2
#112	🇬🇦 Gabon	56.1
#113	🇩🇯 Djibouti	56.1
#114	🇸🇻 El Salvador	56.0
#115	🇰🇬 Kyrgyzstan	55.8
#116	🇿🇦 South Africa	55.7
#117	🇲🇷 Mauritania	55.3
#118	🇹🇬 Togo	55.3
#119	🇪🇨 Ecuador	55.0
#120	🇸🇿 Eswatini	54.9
#121	🇳🇮 Nicaragua	54.9
#122	🇲🇱 Mali	54.5
#123	🇧🇩 Bangladesh	54.4
#124	🇳🇬 Nigeria	53.9
#125	🇷🇺 Russia	53.8
#126	🇳🇪 Niger	53.7
#127	🇧🇷 Brazil	53.5
#128	🇰🇲 Comoros	53.5
#129	🇬🇳 Guinea	53.2
#130	🇦🇴 Angola	53.0
#131	🇮🇳 India	52.9
#132	🇹🇳 Tunisia	52.9
#133	🇲🇼 Malawi	52.8
#134	🇲🇿 Mozambique	52.5
#135	🇰🇪 Kenya	52.5
#136	🇱🇰 Sri Lanka	52.2
#137	🇷🇼 Rwanda	52.2
#138	🇹🇩 Chad	52.0
#139	🇨🇲 Cameroon	51.9
#140	🇵🇬 Papua New Guinea	51.7
#141	🇱🇸 Lesotho	51.6
#142	🇳🇵 Nepal	51.4
#143	🇺🇬 Uganda	51.4
#144	🇦🇷 Argentina	51.0
#145	🇧🇾 Belarus	51.0
#146	🇹🇯 Tajikistan	50.6
#147	🇱🇦 Laos	50.3
#148	🇸🇱 Sierra Leone	50.2
#149	🇭🇹 Haiti	49.9
#150	🇱🇷 Liberia	49.6
#151	🇪🇬 Egypt	49.6
#152	🇵🇰 Pakistan	49.4
#153	🇬🇶 Equatorial Guinea	48.3
#154	🇨🇳 China	48.3
#155	🇪🇹 Ethiopia	48.3
#156	🇨🇬 Congo	48.1
#157	🇨🇩 Democratic Republic of the Congo	47.9
#158	🇿🇲 Zambia	47.8
#159	🇹🇱 Timor-Leste	47.2
#160	🇲🇻 Maldives	46.6
#161	🇹🇲 Turkmenistan	46.5
#162	🇲🇲 Myanmar	46.5
#163	🇸🇷 Suriname	46.1
#164	🇱🇧 Lebanon	45.6
#165	🇬🇼 Guinea-Bissau	44.6
#166	🇨🇫 Central African Republic	43.8
#167	🇧🇴 Bolivia	43.4
#168	🇩🇿 Algeria	43.2
#169	🇮🇷 Iran	42.2
#170	🇧🇮 Burundi	41.9
#171	🇪🇷 Eritrea	39.5
#172	🇿🇼 Zimbabwe	39.0
#173	🇸🇩 Sudan	32.8
#174	🇻🇪 Venezuela	25.8
#175	🇨🇺 Cuba	24.3
#176	🇰🇵 North Korea	2.9
-	🇮🇶 Iraq	N/A
-	🇱🇾 Libya	N/A
-	🇱🇮 Liechtenstein	N/A
-	Afghanistan	N/A

Only four countries in the world have a score of 80 or above, Ireland, Singapore, Switzerland, and Taiwan, categorizing them as completely free economically.

Let’s now look at things from a more regional perspective.

Europe

map of economic freedom in europe in 2023

From a regional perspective, Europe ranks the strongest in economic freedom.

Despite being a powerhouse within Europe, Germany ranks 10th in the continent, with a score of 73.7. One of the categories Germany scored the weakest in was government spending (28.3/100). Over the last three years, government spending has averaged 49% of GDP.

Ireland ranks third globally, scoring particularly high in categories like property rights and judicial effectiveness. The country also has no minimum capital requirement—which is typically a banking regulation and corporate law issue determining how many assets an organization must hold—making it attractive for businesses to set up shop on the Emerald Isle.

Africa

map of economic freedom in Africa in 2023

Currently, Africa is the continent with the least economic freedom in the world, however, it is also the region with the highest potential for economic growth. A booming population, and thus, labor force, are promising for future innovation. In fact, it’s anticipated that Africa will see an increase of 2.5 billion people by the end of the century.

The lowest scoring country in Africa is Sudan, a country under further strain thanks to rife civil conflict. Historically, economic development has been constrained by rampant corruption and a lack of institutional capacity.

Conversely, Botswana registered the highest score on continental Africa (64.9), ranking higher than countries like France and Italy.

The Americas

map of economic freedom in the americas in 2023

In the Americas, the United States ranks 3rd regionally—25th overall—with a score of 70.6. The report attributes the categorization of U.S. as only “mostly free” to issues like inflation, increasing government debt, and unchecked deficit spending. Public debt currently sits at a figure equivalent to more than 128% of GDP.

In South America, Chile comes out on top, ranking above many other economic powerhouses like the U.S., the UK, and Japan. However, the 2021 election of a new Constitutional Assembly could risk the current economic state, as it favors a much more socialist approach to the economy.

East Asia and Oceania

map of economic freedom in asia and oceania in 2023

China’s score is among the lowest in East Asia & Oceania, ranking 154th in the world categorizing it as a repressed economy. The ruling Chinese Communist Party routinely exercises direct control over economic activity. China’s protectionist stance towards foreign investment and a plethora of trade tariffs imposed by other nations also factor in here.

In India, where public debt is equivalent to about 84% of GDP, fiscal health is the worst-scoring category. Additionally, much of the economy remains quite informal; a large share of people work in jobs without tax slips, recorded income, or formal contracts protecting them, which challenges labor freedoms.

The Middle East and Central Asia

map of economic freedom in the middle east and central asia in 2023

It may come as no surprise that the United Arab Emirates has the highest score in the Middle East. The UAE has implemented various measures and initiatives, such as tax exemptions, duty-free zones, streamlined business registration processes, and flexible regulatory frameworks to encourage entrepreneurship and foreign direct investment. As well, the top individual and corporate tax rates in the country are 0%.

Türkiye’s lowest scoring category relates to judiciary effectiveness and the rule of law. President Recep Tayyip Erdoğan, who has already been in power for two decades, recently won the country’s election, again cementing his authority over Turkish politics. This makes it unlikely that Türkiye’s economic freedom score will recover in the short to medium term.

Where Does This Data Come From?

Source: The Index of Economic Freedom from the Heritage Foundation

Data notes: A number of countries were not ranked due to unavailable data or other factors, like ongoing war, that made it difficult to properly assess the economy. These countries include: Ukraine, Afghanistan, Iraq, Libya, Liechtenstein, Somalia, Syria, and Yemen.