Bankruptcy Snapshot: Anemic Oil Prices Pressure Texas Economy, Other Sectors Show Softness

Originally published by Androvett Legal Media Blog.

The upward trend in Texas business bankruptcies continued in 2016 with hefty double-digit increases across all regions of the state, according to an Androvett Legal Media & Marketing analysis of federal filings. In particular, Ch. 11 business bankruptcy filings increased 42.4 percent statewide, with filings up more than 50 percent in both the federal Southern and Northern Districts of Texas.

A glance at the historic numbers is revealing: This continues to be a story about the impact of falling oil prices on the heavily leveraged Texas energy economy.

Writes Texas Lawbook and the Dallas Business Journal:

For the past two-and-half years, the energy industry has been in crisis. Oil slipped to $30 a barrel. Thousands and thousands of people lost their jobs. A record number of oil and gas companies and the businesses servicing them declared bankruptcy…More than 1,280 Texas businesses have filed for bankruptcy during the past two years – many of them related to the downturn in oil and gas prices, according to new data research provided by Androvett Legal Media.

 

Filings in the Western District of Texas (which includes upstream producers in the oil-rich Permian Basin) increased by 100 percent during the past two years – from 73 in 2014 to 146 in 2016. The jump was even bigger in the Southern District (which includes Houston, San Antonio and producers in the Eagle Ford Shale), where 293 companies filed for Chapter 11 bankruptcy protection in 2016 – up from 141 in 2014.

“Oil and gas is an industry that has highs and lows,” Jackson Walker bankruptcy partner Bruce Ruzinsky tells Lawbook and the Dallas Business Journal. “The temptation in the oil and gas business is to catch the wave when things are blowing and going.

“This downturn has been more difficult than past ones because it has gone on longer and prices went lower than people expected,” Mr. Ruzinsky says.

KVUE Austin reporter Erin Jones notes that the numbers point to softness in other sectors, including the tech industry:

Patty Tomasco, who works in the bankruptcy division of Jackson Walker, said last year her practice saw a steady stream of cases dealing with the natural consequences of tech companies.

“With tech companies in Austin, you have a lot of people competing to be the next great app maker or the next great technology company,” Tomasco said. “There’s always going to be a winner and there’s always going to be about 10 losers. The 10 losers are going to have to file bankruptcy and do something else.”

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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