Ultra Petroleum Corp. filed for bankruptcy protection, the latest oil and gas explorer to fall victim to the prolonged slump in energy prices.
Ultra listed $1.3 billion in assets and $3.9 billion in debt in court papers filed in Houston on Friday. The Houston-based company has 159 employees and its main assets are gas-producing properties in Wyoming, as well as some assets in Pennsylvania and crude oil properties in Utah, according to court papers.
“The low commodity prices, and especially the low natural gas prices that prevailed throughout 2015 and have continued through the first four months of 2016 have had a devastating impact,” Chief Financial Officer Garland Shaw said in a filing explaining events that led to the bankruptcy.
Among its first requests to the court will be for permission to continue a surety bonding program that had $12.6 million outstanding as of the bankruptcy date, and that secures its obligations on environmental, road damage, and plugging of wells, according to court records.
Between March and early April, Ultra missed a series of principal and interest payments owed to lenders and bondholders. And on April 14, the company was sued by pipeline operator Sempra Rockies Marketing LLC for failing to pay transport fees.
The oil market is suffering its worst slump in decades, brought on by a glut of production. Crude inventories are at their highest levels since 1930 in the U.S., according to data from the Energy Information Administration.
Much of the problem can be traced to a record-breaking surge in U.S. oil production that wouldn’t have been possible without a tremendous amount of debt. Many independent drillers, the small producers that drove the shale boom, outspent cash flow even when oil was $100/bbl, and made up the difference with bank loans and high-yield bonds.
Officials from 18 oil exporters meeting in Doha failed on April 17 to come up with an agreement to freeze production. At the end of March, JPMorgan Chase & Co. strategists said that oil and gas companies are likely to experience a 20% default rate over the next two years.
The trouble has made banks unwilling to keep financing struggling producers. Since the start of the year, lenders have yanked $6.4 billion in credit from 36 oil and gas companies, the sharpest reductions since oil prices began toppling two years ago, according to data compiled by Bloomberg.