OPEC’s deal to cut oil production isn’t likely to save investors in troubled U.S. producers from seeing their stakes vanish in chapter 11, according to restructuring experts, the Wall Street Journal reported today. A surprise move by the Organization of the Petroleum Exporting Countries to cut crude production by 1.2 million barrels a day, or more than 1 percent of global output, has energy companies and their investors cheering. But lawyers and advisers say that crude’s recent price rally, and the expectation it will continue in 2017, may have come too late for distressed oil and gas outfits that are already in chapter 11, or poised to file for bankruptcy with restructuring deals that were months in the making. “You need a lot more of this to repair the cumulative impact of low oil prices,” said Steve Strom, chief executive of investment bank Blackhill Partners. Energy XXI Ltd., an oil and gas explorer on the cusp of exiting chapter 11, shows why. The Houston company sought bankruptcy protection in April with a $3.6 billion debt load and recently reached a restructuring deal with top creditors. The restructuring plan, which a bankruptcy judge must confirm, was inked in mid-November, two weeks before the OPEC agreement. While the success of the production-cutting accord still depends on several variables, it raised hopes that oil prices could see a sustained rally above $50 a barrel next year as a brutal two-year supply glut dissipates. But those hopes appear unlikely to upset Energy XXI’s exit proposal, which values its business at around $600 million. Read more. (Subscription required.)
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