Banks Much Deeper in the Hole on Oil & Gas Collateral than they Pretend…“All of it is in the gutter.”
by Wolf Richter
WolfStreet.com
January 25, 2016
An asset is ultimately worth what a buyer is willing and able to pay for it. That price turns out to be terribly low for oil and gas assets. This is a big problem for banks, which used these assets as collateral for energy loans they extended during boom years — a much bigger problem than suggested by the current spate of puny additions to loan loss reserves.
Natural gas driller Quicksilver Resources, which filed for Chapter 11 in March last year, sent an email to its remaining employees Friday night at 11 p.m. to announce the sale of all of its US oil & gas assets, the Fort Worth Star Telegram reported. Saturday morning, it filed the documents in bankruptcy court in Delaware. The judge has to approve the deal.
The price it got for its US assets is an eye-opener.
The company, which is based in Fort Worth, TX, also owns some assets in Canada which it will try to sell separately. But they’re not included in the bankruptcy. When it filed for bankruptcy, it listed $2.35 billion in debts and only $1.21 billion in assets. “The rest was drilled into the ground to never be seen again,” I wrote at the time.
The Rest…HERE
