Good afternoon everyone,
Checking out the filings in Delaware U.S. Bankruptcy Court is a good way to check out industry trends.
One trend that is now being watched comes from oil/gas drillers and suppliers that led the revolution in hydraulic fracturing or fracking.
Fracking helped the United States emerge as the world’s largest oil producer. But profits have been elusive, especially for smaller fry.
While overall oil patch bankruptcies are down in 2019, a few recent filings have made their way to Wilmington.
West Chester, PA-based drilling equipment maker Schramm filed for Chapter 11 earlier this month in Wilmington, joining Elk Petroleum and Emerge Energy Services. On the coal side, a mid-sized miner in West Virginia is also heading to Wilmington. (See story link in our Business Reading list below)
Schramm cited depressed conditions in the drilling industry in its filing. Elk is a small exploration company that works in the Rocky Mountain region.
Emerge cashed in on the boom in specialized fracking sand mined in the upper Midwest. Trainloads from pits were a common sight as sand was dispatched to Pennsylvania, Texas and other hotspots.
Now, more sand is being extracted in West Texas near the fracking epicenter in the Permian Basin of Texas and New Mexico. A glut has developed, and some producers away from the action can no longer compete.
Emerge is not alone in dealing with the sand glut. In Houston, Shale Support, a fracking sand supplier, also filed for Chapter 11 in Texas.
With demand for sand still strong, it is possible that restructurings and shutdowns could balance supply and demand and lead to better times.
The boom and bust cycle is an accepted part of the oil business but can be painful for investors and communities that were profiting from the sand or all-out exploration that may be scaled back. In the upper Midwest, sand mining is not universally accepted, due to issues ranging from digging sandpits, dust and truck traffic.
Meanwhile, U.S. Bankruptcy Court in Wilmington and local lawyers may see additional work if fracking does not become more profitable.
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