Fracking operation in Texas. (Photo: Tim Lewis via Wikimedia Commons)

After the price of a barrel of oil took a steep fall this week, many Texas firms continued to gear up for what will likely be a difficult year for their oil and gas clients, further increasing demand for bankruptcy and restructuring lawyers.

The price of a barrel of West Texas Intermediate crude had been slipping off its $61.06 close at year-end 2019, but a price war between Saudi Arabia and Russia last weekend caused the price to plummet and stay in the $30 range this week.

"We've seen this coming for quite a while—maybe not just this most recent drastic downturn this past weekend—but there's no question numerous factors have been leading to this downturn for many months," said Jason Cohen, a restructuring partner at Bracewell in Houston.

Bracewell is already energy-focused, Cohen said, but the firm last fall established a distressed oil and gas task force, comprising bankruptcy and restructuring lawyers, but also M&A and finance.

"We draw on expertise we already have," he said.

Haynes and Boone has been preparing for a global recession since 2015, when oil prices had an earlier decline, said Ian Peck, a partner in Dallas who chairs the firm's restructuring group. Since that time, the firm hired three bankruptcy lateral partners and three associates. While it has 17 full-time restructuring lawyers, he said, that team works closely with 20 in the oil and gas finance group.

He said about 80% of the firm's work now is oil and gas-related. But he also expects companies in other industries to feel the economic impact of the coronavirus, such as hospitality, travel and transportation.

"Time will tell if we were proactive enough. We were pretty proactive in preparing for this kind of eventuality," Peck said.

Other firms have been hiring as well, including Porter Hedges, which has grown from about four or five bankruptcy lawyers in 2015 to about eight or nine today, said Josh Wolfshohl, a restructuring partner in Houston. The firm may bring on more, he said.

Jeff Nichols, Houston-based co-chair of Haynes and Boone's energy practice group, said his firm and others in Texas have in the past helped energy clients deal with a price drop, but the domestic industry does more exporting now than in the past, so international events are a factor. Deals in the energy sector have become more difficult, requiring more legal work, he said.

"The consequences of the price drop the last week will play out later this year," he said.

Haynes and Boone has tracked North American oil and gas producer bankruptcies since 2015 in its Oil Patch Bankruptcy Monitor, tabulating more than 200 over the five years.

Jay Ong, a bankruptcy partner at Munsch, Hardt, Kopf & Harr in Austin, said he expects a strong level of energy restructuring work this year not only because of the recent price drop, but also because of the "excessive volatility in this industry that's already known for volatility."

Cohen, the Bracewell lawyer, said restructuring work for oil and gas companies increased during the fourth quarter of 2019 because private equity companies and banks "lost interest in investing in oil and gas," so companies looking for financing have had a harder time getting it.

"There is, I'd say, a sellers market for bankruptcy talent," Cohen said.

Recruiter Lee Allbritton of Amicus Search Group said demand for bankruptcy lawyers started picking up in Texas during the last part of 2019, because energy prices have been in steady decline for more than a year.

Demand has not been overwhelming, he said, but he expects it to intensify, noting that one client recently asked him to "move bankruptcy to the top of the list."

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