In the midst of a crumbling oil industry, a Canadian oil exploration company has sought out bankruptcy protection in its home country with an insolvency filing.
According to the Wall Street Journal, Southern Pacific Resource Corp. filed under Canada’s Companies’ Creditors Arrangement Act, a form of bankruptcy protection similar to the debt restructuring plan of the Chapter 11 bankruptcy timeline in the U.S.
Southern Pacific Resource calls the move to seek out bankruptcy help an action in its best interests, considering the fact that the price of crude oil has dropped by a crippling 58% since last June, and the company’s own oil production has fallen as a result.
Southern Pacific Resource currently owes C$135.5 million to senior bondholders, C$260 million to junior bondholders and C$172.5 million in debt to convertible bondholders, the Wall Street Journal reports. As its bankruptcy protection is so similar to that of the Chapter 11 bankruptcy timeline, the company will likely pay back this debt over a creditor-approved repayment plan.
The company, which has wells in both Alberta and Senlac, Saskatchewan, has hired RBC Capital Markets to provide financial advising for strategic alternatives, according to the Wall Street Journal. Other options the company is considering include selling itself off and recapitalization. Any of these options would give Southern Pacific Resource the ability to relieve itself of its financial burden and to begin pursuing new drilling operations.
However, with both OPEC and U.S. oil drillers refusing to let up on oil production, economists forecast that the oil industry will continue to see bottom-of-the-oil-barrel prices, continued layoffs, project cancellations and bankruptcies.
According to the Wall Street Journal, Southern Pacific Resource’s initial protection period will expire on February 20.
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