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Wednesday, March 27, 2024 | Back issues
Courthouse News Service Courthouse News Service

Oil Firm in Chapter 11|Despite Rising Prices

HOUSTON (CN) — Oil and gas driller LINN Energy filed for bankruptcy Wednesday even as the price of oil rebounded to prices not seen since December.

The publicly traded Houston-based company is a limited liability company in name, but it's set up as a master limited partnership for tax savings and must pay cash to its investors every quarter.

LINN Energy and two subsidiaries, LinnCo LLC and Berry Petroleum, filed Chapter 11 bankruptcy in Houston.

The company reported about $8.3 billion in debt and said in a statement it intends to pay its 1,650 workers' salaries, health care and other benefits, in addition to its vendors and suppliers, throughout the restructuring process.

"Like many others in our industry, LINN has been impacted by continued low commodity prices," CEO Mark Ellis said in a statement.

"We believe that these steps will provide us the financial flexibility to successfully manage in the current commodity price environment and, when combined with constructive agreements with our remaining creditors and potential third party financing, will provide a platform for future growth."

The price of a LINN Energy unit is 33 cents, down from more than $31 in January 2014.

The company has oil and gas holdings in Kansas, Wyoming, East and West Texas, Los Angeles and Orange County, Calif.

LINN Energy is the 70th oil and gas producer to go bankrupt since January 2015, according to the Haynes and Boone law firm, which tracks industry bankruptcies.

The bankruptcy filing came as oil prices reached a six-month high, buoyed by data from the International Energy Agency that showed an unexpected drop in U.S. reserves and decreased output from Nigeria, Libya and Venezuela.

The wildfires in Alberta, Canada have taken 1.2 million barrels per day in production capacity offline, the agency reported.

Brent crude, the international benchmark, is up to $48 from around $30 in January. The price hasn't been that high since December.

"A few years ago, shut-ins such as we have seen in Canada would have sent oil prices sharply higher. However, recently Brent crude oil prices have hovered around $45 [per barrel], with little reaction seen to the Canadian wildfires," the energy agency said in its latest Oil Market Report.

The lack of market reaction could be attributed to rise in production from OPEC, whose members increased their oil production by 330,000 barrels per day in April compared to March, the energy agency reported.

Fresh off U.S. and European Union trade sanctions, Iran led the charge for OPEC, producing nearly 3.6 million barrels per day, the most since November 2011.

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