When Samson Resources Corp filed this year's biggest energy-related bankruptcy in September, the oil and gas company said it had a deal to emerge from Chapter 11 protection by year-end. Just a few weeks later, plunging gas prices had left the deal in tatters.

Samson joins about a half dozen troubled energy producers that have sought court protection from creditors this year and discovered asset values have evaporated or that a restructuring plan has unraveled as commodity prices plunge.

Bankers, lawyers and advisers involved in the cases blame the steep drop in energy prices and the industry's huge need for constant, capital-intensive drilling and exploring to sustain production.

In the past 16 months, the price of oil has sunk to around $40 per barrel from about $100, ending years of elevated crude prices that fueled oil companies' debt-financed expansion.

"It can be a really tough spot especially when you have the bottom drop out," said Michael Cuda, a bankruptcy lawyer with Squire Patton Boggs in Dallas, who represents a lender in the Samson case. "A lot of assets suddenly become valueless," he said, speaking of energy companies generally.

Samson declined to comment.

Many of the energy companies now in Chapter 11 are among the weakest players, but their experience serves as a warning that the dozens of their peers struggling to remain afloat may find their assets quickly depleted in bankruptcy, dishing out heavy losses to investors.

Bankruptcy is supposed to be a relatively brief refuge while a company works out a turnaround.

Quicksilver Resources Inc entered bankruptcy in March and in September presented creditors a turnaround plan, according to court documents. Yet two weeks later the oil-and-gas producer changed course, saying rapidly dwindling assets forced it to sell its business.

Quicksilver did not immediately respond to a request for comment. (Reuters)

Source: www.businessworld.ie