For the second time in a week, an energy company vexed by low oil prices has filed for bankruptcy. This time, it’s Houston producer Saratoga Resources Inc. that needs the protection of the courts to reorganize its balance sheet.
Saratoga had addressed debilitating run-time issues in early 2014. However, the subsequent steep decline in oil and gas prices and a $3.7 million arbitration award for Harvest Operating against the company forced its hand.
Chairman and CEO Thomas Cooke said in a statement that Saratoga hopes to use the Chapter 11 process to avert action by Harvest while Saratoga pursues its own legal claims against that company. Cooke also said its employees and business wouldn’t be a disrupted during the bankruptcy process.
“We believe that our long-term prospects remain solid, that we continue to have substantial untapped reserves and that our development program will continue to increase daily production,” he said. “The process we have undertaken will better allow us to realize the full value of our properties for the benefit of both our creditors and our stockholders and position us to benefit from what we expect is an inevitable recovery in oil and gas prices.”
Cooke was not immediately available for additional comment.
Saratoga holds about 51,500 acres by production in the Gulf of Mexico along the Louisiana coastline and shallow Gulf shelf.
Saratoga has been through the bankruptcy process once. In 2008, production was disrupted by Hurricanes Gustav and Ike for 18 days, and a dramatic decline in oil prices pushed Saratoga to file for Chapter 11 in March 2009, according to Grant Thornton LLP, which represented the company during the proceedings. The following year, Saratoga had paid its creditors in full and shareholders managed to retain their interests, Grant Thornton said in a study on the case.
Saratoga’s filing comes on the heels of Wednesday’s filing by Hercules Offshore. Four other U.S. producers have already filed for bankruptcy this year, and industry insiders say they expect more as the industry responds longer term to cheaper oil.