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Low Oil/Gas Prices Yield Bankruptcy, Share Offering, Some Forbearance

Tough times are continuing for oil/gas producers and related companies as their finances feel the pinch from fallen oil prices.

Fort Worth-based Duer Wagner III Oil & Gas recently filed for bankruptcy after struggling to refinance debt, while Denver-based Cimarex Energy Co. is planning a six million-share stock offering to, in part, fund drilling and completions. And on Thursday, Houston's Sabine Oil & Gas Corp. announced a forbearance agreement with lenders as the fallout from the oil price collapse continues. The sector also recently lost another hydraulic fracturing (fracking) services company.

Duer Wagner is the second Fort Worth-based company in recent months to file for bankruptcy. It joins Quicksilver Resources Inc., which filed in March (see Shale Daily, March 18) after missing an interest payment in February (see Shale Daily, Feb. 18).

According to the Duer Wagner filing, profits have fallen more than 50% since the oil price collapse began. More than $120 million is owed by a dozen affiliated companies. President of the entities is Duer Wagner, who "has spent his life in and around the oil and gas business," according to a bankruptcy court document. "He began his career as a driller and for more than 30 years has successfully owned, managed and controlled oil and gas interests throughout Texas, Louisiana and North Dakota, among other locations."

Struggling Sabine is focused on the Cotton Valley Sand and Haynesville Shale in East Texas, the Eagle Ford Shale in South Texas, the Granite Wash in the Texas Panhandle and the North Louisiana Haynesville.

Sabine's forbearance agreement follows a missed interest payment earlier this year and applies to its second lien term loan facility. Sabine said the arrangement provides "...additional flexibility as it continues discussions with its creditors..." As of May 8, Sabine had about $277 million in cash, "which provides substantial liquidity to fund its current operations. The company is continuing to pay supplies and other trade creditors in the ordinary course," it said. Sabine hired financial advisers earlier this year (see Shale Daily, March 16).

And separately, Midland, TX-based Frac Specialists LLC has sought bankruptcy protection as well. By the count of analysts at Wells Fargo Securities LLC, that makes five fracking companies that have shut down in recent months, representing about 600,000 hp of pressure pumping capacity.

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