Pushing companies 'over the edge': Oil and gas insolvencies surge to three-year high
A protracted downturn in natural gas prices has battered the balance sheets of some oil and gas producers in Western Canada, driving insolvencies in the sector to their highest level in three years.
The number of producer bankruptcies, receiverships, creditor proposals and filings under the Companies’ Creditors Arrangement Act (CCAA) was greater in 2024 than in the previous two years combined, according to an analysis by the Financial Post of court filings and data compiled by Insolvency Insider Canada.
Insolvent oil and gas companies in Western Canada collectively owed more than $1.2 billion in debt in 2024, a more than 700 per cent increase over the sector’s distressed filings in the prior year.
There have been at least a dozen oil and gas producer insolvencies so far this year, compared to about five in 2023 and three in 2022.
The largest of these, Calgary-based Long Run Exploration Ltd., is currently attempting to restructure, with a long list of creditors unlikely to get any money since it will be substantially eaten up by the company’s $308.5 million in environmental obligations.
Should the restructuring fail, it’s feared that Long Run’s 4,856 licensed wells and 523 facilities could become the responsibility of Alberta’s industry-funded Orphan Well Association.
Environmental liabilities were a key driver in a number of insolvencies in the oilpatch in 2024 as new regulatory changes disrupted the sector.
“Under the old regime, if you had a bunch of inactive wells, it wasn’t as much of a problem, but now your inactive inventory is resulting in increased spend requirements annually (on decommissioning and reclamation),” Keely Cameron, a partner at Bennett Jones LLP who specializes in oil and gas regulatory issues,
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