Saudis No Longer Limiting Production Means More Oil Company Bankruptcies In 2016

Jan. 05, 2016 1:45 PM ETCHRD, COP28 Comments


  • The Saudis have upped the ante in the oil price game.
  • North American oil and gas bankruptcies totaled $13 billion in 2015.
  • Iran is set to start shipping 1M barrels a day in the first half 2016.

In previous articles I have argued that Saudi Arabia (and the other oil sheikdoms) are making a concerted effort to destabilize the investment market for shale oil and other new oil competitors. The key to their plans is to keep the price of oil low (less than $50) for years and to use their substantial trillion-dollar sovereign wealth funds to make up for the difference. This latest pronouncement adds credence to my hypothesis.

In my first article, "4 Reasons Why Saudi Arabia Will Keep The Spigots Open Until 2018," I outline an argument that Saudi Arabia's goal is to make investors think twice (or three times) before they ever invest in shale again. To do that, the Saudis need to keep the pressure on for two to three years, thereby driving many oil and gas companies into bankruptcy. In my second article, "Saudi Arabia And OPEC Are Going To Keep Pumping Until Shale Investment Is Crushed," I continued with that theme and addressed some data on shale production and default odds based on the oil price.

In this article, I will look at what actually happened in 2015 to see if there is a trend going forward that supports my thesis.

"Power has no limits" - Tiberius

Source: MarketWatch.

In 2015, Oil and Gas Bankruptcies Totaled $13 Billion

The Texas law firm Haynes and Boone, LLP specializes in energy bankruptcies and actually operates a website called "Bankruptcy Monitor." The following chart is from that site (modified by the author):

Note the largest BR, Samson Resources. This was a company bought out by high-powered, sophisticated investment firm KKR & Co. in the largest leveraged buyout ($7.2B) in shale oil history. How long do you think it will be before KKR invests in shale oil again?

Here's the unhappy couple, Henry Kravis and

This article was written by

Bill Zettler profile picture
Focused on value stocks with turnaround potential and low risk/reward ratio
Trained as a scientific programmer, I worked on war game software for NORAD (North American Air Defense) and statistical software for Abbott Labs. For most of my 40-year career developed and sold financial and accounting software. Was principal or founder of 3 small (5-30 employees) software companies. Wrote a book on public pensions and a play that won an award in Writer Digest Magazine's annual writers competition, a contest that draws over 10,000 entries a year. Currently retired.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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