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Rising oil prices apparently are not enough to save the once-promising master limited partnership (“MLP”) Seadrill Limited.  Seadrill stock plummeted, going down 54% on April 4, 2017 as the company announced that it will likely file for bankruptcy.

The most ominous news from Seadrill was its warning to investors of its substantial debt load and its expectation that shareholders are “likely to receive minimal recovery for their existing shares.”

Seadrill, as many oil and gas companies, has seen its value drop dramatically over the last three (3) years.  But the company was once highly-valued by Wall Street, with a market capitalization of $23.7 billion as recently as 2013.  Today, the company has dropped approximately 98% in value and sits at a market capitalization of just under $400 million.

Our attorneys have reported in the past on the Haynes and Boone, LLP Oil Patch Bankruptcy Monitor (the “Bankruptcy Monitor”), a report that monitors the North American oil and gas company bankruptcies.  The Bankruptcy Monitor is updated periodically, with its most recent update coming in February 2017 and lists the total North American oil and gas companies that have filed bankruptcy at 114 since January 2015.

According to the Bankruptcy Monitor, the total amount of debt for the aggregate of the oil and gas companies’ bankruptcies is over $74 billion. Some of these companies were heavily recommended by Wall Street’s biggest investment banks such as Raymond James & Associates (CRD# 705), Citigroup Global Markets (CRD# 7059), Credit Suisse Securities (CRD# 816), Merrill Lynch (CRD# 7691), Wells Fargo Securities (CRD# 126292), and Morgan Stanley (CRD# 149777).

Notable oil and gas companies listed in the report that may have been recommended by the aforementioned firms are Linn Energy; Breitburn Energy; Sandridge Energy, Atlas Resource Partners, Swift Energy, and Memorial Production Partners.

In April 2016, Peabody Energy Corp. (“Peabody”), a one-time Wall Street darling based in St. Louis, Missouri filed for Chapter 11 Bankruptcy protection.  Almost a year to the day, Peabody emerged from bankruptcy on Monday, April 3, 2017.  A day later, another one-time Wall Street darling, Seadrill (ticker “SDRL”), a deepwater drilling contractor that provides drilling services to the oil and gas industry, declined 54% following its warning to investors that the Bermuda-based company is likely to seek bankruptcy protection (or the equivalent) in the United States or United Kingdom (company headquarters).

Seadrill is just another corporate casualty among the hundreds of oil, gas, coal and energy companies that filed and sought bankruptcy production since early 2015.  The Securities Arbitration and Investment Litigation Lawyers at the Silver Law Group, The Law Office of David Chase, P.A. and Ciklin Lubitz & O’Connell (www.oilgasfinraarbitration.com) are currently investigating cases relating to investments in Peabody and Seadrill, as well as many other similarly-fated oil, gas, coal and energy producing companies, such as Alpha Natural Resources, Arch Coal and Linn Energy – which have all filed for bankruptcy.

Like many other energy companies, Seadrill is likely to follow a familiar “play book”:  seek Ch. 11 bankruptcy protection, negotiate golden parachutes for its executive team, renegotiate debt and credit, emerge from bankruptcy, and leave numerous investors with little or nothing to show for their principal invested.

Linn Energy exited its chapter 11 bankruptcy leaving many shareholders with nothing but a worthless piece of paper.

Linn Energy is an oil and gas master limited partnership (“MLP”) founded in 2003.  The company went public just three (3) years later in 2006, raising approximately $261 million.

Linn Energy was once the darling of the oil and gas industry, reaching peaks of $40 per share in late 2012.  The company went on an acquisition spree, including Berry Petroleum for $4.3 billion at the height of the oil boom in 2013.  Unfortunately, the oil boom didn’t last, and the debt Linn Energy took on was too large to support when the price of oil began to plunge in June 2014.

Peabody Energy (OTCPK: BTUUQ) announced on January 26, 2016 that the U.S. Bankruptcy Court for the Eastern District of Missouri approved the company’s reorganization plan, disclosure statement, private placement agreement and backstop agreement.

The bankruptcy court’s approval will allow Peabody to begin soliciting votes from its creditors on the proposed plan of reorganization ahead of March deadline and hearing to confirm the plan.

The bankruptcy court’s approval is another step closer to the final blow for shareholders, who, according to some analysts, probably will end up with cancelled shares and no equity in the reorganized Peabody Energy.  Shareholders have been fighting to get a piece of the reorganized company, even attempting to create an official committee to assist in crafting the reorganization plan.  The bankruptcy court judge denied that request earlier this month.

Linn Energy, LLC (LINE) filed for bankruptcy protection in May 2016.  U.S. Bankruptcy Judge David Jones issued an Order today confirming LINE’s chapter 11 bankruptcy restructuring plan.  Our attorneys have previously written on the subject of LINE and continue to update accordingly.

It is believed that under the bankruptcy plan, LINE will be able to shed approximately $4.3 billion of the $6 billion debt it claimed in its May 2016 bankruptcy filing.  The remaining $1.2 billion in debt will be absorbed by Berry Petroleum Co. LLC, a company LINE acquired in 2013, which will now become a separate entity.

Both LINE and Berry Petroleum are expected to emerge from bankruptcy and business will continue as usual, leaving many investors in a lurch and in many respects “holding the bag.”  The Securities Arbitration and Investment Litigation Lawyers at the Silver Law Group, The Law Office of David Chase, LLC and Ciklin Lubitz & O’Connell (www.oilgasfinraarbitration.com) continue to investigate and have matters pending against firms/broker that underwrote, sold and recommended LINE to investor customers.

In early 2016, oil prices bottomed out and a wave of North American oil producers continued to file bankruptcies at record and alarming rates.  Where are we a year later?  Oil prices have increased, generally the result of an agreement by OPEC members to reduce output, which based on longstanding distrust among its members, may change at any time.  With potential uncertainty amidst, the formalities of Brexit, and President-Elect Donald Trump taking the reins as President on January 20, 2017, the world is unpredictable!

The market’s overall appreciation more than likely positively impacted your overall investment portfolio in 2016, unless of course you happen to own securities (i.e. Boeing or Ford) that were subject to one of Trump’s famous tweets.  However, if you were an investor of securities linked to the oil, gas and energy sector in the past couple of years, chances are your account statements still show that many of these securities lost a substantial portion or their entire value of your principal.

In many investments, your principal investment is gone, and depending whether these investments were Master Limited Partnerships (“MLPs”), you have or very soon will receive a K-1 indicating that you may still owe additional taxes – yes, on that same investment that you lost all or most of your principal.  This has left many investors simmering!

SandRidge Energy Inc. (“Sandridge”) emerged from bankruptcy on October 4, 2016, shedding $3.7 billion of debt in its reorganization and trading on the New York Stock Exchange.

Our lawyers have been monitoring the financial state of many oil and gas companies, and the brokerage firms and brokers that underwrote and sold the oil and gas companies’ securities.

Sandridge filed for bankruptcy protection in May 2016, citing high debt and low commodity prices.  Judge David R. Jones last month approved the negotiated reorganization plan after it received “overwhelmning” support from Sandridge’s lenders.

Silver Law Group, The Law Firm of David R. Chase, and Ciklin, Lubitz & O’Connell have initiated an investigation in unsuitable recommendations and overconcentration in Arch Coal, Inc. (“Arch Coal”).

U.S.-based Arch Coal was the second-largest coal producer in the country as of 2015, with 128 million tons of coal sold in 2015.  Even with that lofty title, plunging oil and energy prices brought the company down.

The company, publicly traded on the New York Stock Exchange at one point but now traded on the OTC Markets, was a hot commodity in trading circles.

Sandridge Energy (“Sandridge”) and Arch Coal (“Arch”) earned court approval to emerge from bankruptcy on September 9 and September 13, 2016, respectively.  Together, Sandridge and Arch were able to shed approximately $9 billion in debt and start anew.  How nice!

If you’re a Sandridge and Arch creditor, how does that sit with you?

These companies join 100 other North American oil producers that have filed for bankruptcy protection since early 2015.  The Securities Arbitration and Investment Litigation Lawyers at the Silver Law Group, Law Office of David Chase, LLC and Ciklin Lubitz & O’Connell are currently investigating cases relating to investments in Sandridge and Arch.  Sandridge filed for bankruptcy protection in May 2016, subsequent to Arch’s bankruptcy filing in January 2016.

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