Some bankrupt oil and gas drillers cannot give their assets away

The price of oil is in free fall and Terry Clark could not be happier.

As Bloomberg reports, Clark made an offer to buy properties from cash-strapped small driller Dune Energy Inc. in mid-2014, when the crude price topped $100 a barrel. Dune turned him down. A year later, as oil plunged to $60 a barrel, Dune filed for bankruptcy and Clark’s White Marlin Oil & Gas Co. picked up the assets at auction at a deep discount.

“What we offered versus what we got it for, it’s a great price,” Clark tells Bloomberg. “We’re going to continue to play these bankruptcies. We’re participating in two more right now.”

Winners and losers are emerging from the energy bust. What’s a meal for Clark is indigestion for banks that financed the boom using oil and gas properties as collateral. The four biggest U.S. banks—Bank of America, Citigroup, JPMorgan Chase and Wells Fargo—have set aside at least $2.5 billion combined to cover souring energy loans and have said they’ll add to that if prices stay low.

There’s plenty to keep businessmen like Clark bargain-hunting. Last year, 42 U.S. energy companies went bankrupt, owing more than $17 billion, according to a report from law firm Haynes & Boone.

Dune went belly up owing $144.2 million. Its assets sold for $20 million. In May, American Eagle Energy Corp. filed for bankruptcy with debts of $215 million. Its properties sold for $45 million in October. BPZ Resources Inc. owed $275.2 million. Its assets fetched about $9 million. Endeavour International Corp. went into bankruptcy owing $1.63 billion. The company sold some assets for $9.65 million and handed over the rest to lenders. ERG Resources LLC opened an auction with a minimum bid of $250 million. The response? No takers.

“A lot of people got into this business and didn’t really understand the ups and downs of price cycles,” says Becky Roof, a managing director for turnaround and restructuring with the consulting firm AlixPartners. “They’re getting a very bad dose of reality right now.”

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