Oil Sell-Off Presents Buying Opportunity for PE, Distressed Debt Investors
The recent sell-off in oil markets threatens growth prospects for cash strapped oil & gas companies and any assurance of reasonable near-term returns for their investors, but it presents a unique buying opportunity for private equity and distressed debt investors. With oil and natural gas prices facing continued downward pressure from the threat of a global slowdown exacerbated by the spread of the deadly Coronavirus, private equity buyers and specialized debt investors are likely to swoop in to acquire distressed assets and companies over the next 12 to 24 months. Oilfield services companies could also become prime targets, as the demand drilling services, rigs and equipment continues to wane. The latter half of 2019 saw a sharp increase in the number of formal bankruptcy filings by North American E&P companies and service providers relative to 2017 and 2018, as well as a rise in out-of-court recapitalization agreements involving private investors and specialized lenders. This trend is expected to gather pace through 2020, especially given the steep drop in oil prices already witnessed during the first month of this year.