BPZ Resources Inc. is not the first oil company to file for bankruptcy, just the most recent. The company was supposed to pay around $60 million to bondholders in early March, but they neglected to make that payment. This warning sign proved to point to larger issues as the company put in a filing for Chapter 11 bankruptcy.
The problem, a spokesperson said, is simply that the oil industry in general has really turned around. Prices have been falling lately, and it has cut deeply into revenue. While consumers have enjoyed lower prices at the pumps, these drops have been too much for companies to withstand.
The company had been trying to restructure the existing debt that it held, hoping that a refinancing plan would allow them to continue operations. This was already a difficult process, but the drop in the oil market made it impossible. The company had to declare bankruptcy as a result.
According to the court documents that were filed, BPZ has around $364 million in assets and a debt of $275 million. The filing is going to get them court protection for a time, and they are going to keep working with that protection in place. They have been losing money at an alarming rate. The financial statements that were most recently put out showed a total loss in three months of $40.1 million.
Even if the overall economy is doing well, a decline in any one industry can make a bankruptcy filing necessary. If you're thinking about doing this in California, make sure that you know what legal steps to take.
Source: The Wall Street Journal, "BPZ Resources Files for Bankruptcy Protection Amid Oil-Price Drop," Patrick Fitzgerald, March. 09, 2015
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