Updated 1:18 p.m.
Denver-based Extraction Oil & Gas has filed for bankruptcy protection as oil prices plunge amid the COVID-19 pandemic.
“After months of liability management and careful analysis of our strategic options, we determined that a voluntary chapter 11 filing with key creditor support provides the best possible outcome for Extraction,” CEO Matt Owens wrote in the statement released Sunday.
The company is working on a restructuring plan, the statement said. So far, a consensus hasn’t been reached with all of its creditors, according to the statement. The company received $125 million from lenders to continue operating during negotiations, the statement said.
Energy prices have collapsed due to a drop in demand during the pandemic and price wars between Russian and Saudi Arabia. The value of a barrel of oil plunged 50 percent this year, decimating the energy sector worldwide.
Problems for Extraction started even before the pandemic abruptly halted travel around the globe. The company laid off roughly 20 percent of its workforce in February.
The company’s debt load put it in a precarious position, Enverus analyst Bernadett Johnson said.
“Extraction was on that list of companies that the market was watching to see how they weathered the storm and if they were able to,” Johnson said.
Energy companies throughout the state are struggling. Whiting Petroleum, also based in Denver, filed for bankruptcy in April. Halliburton, Liberty Oilfield Services and Basic Energy Services have all cut jobs in Colorado in recent months.
Weld County, the heart of Colorado’s energy business, has been hit hard as the crisis ripples out to the service industries that support workers at the production facilities.
Colorado oil producers will suffer until oil prices stabilize, which doesn’t look likely in the near-term, Johnson said. As long as businesses and individuals are afraid to travel, demand for oil will be on hold.
The number of active wells in Colorado plunged to 6 last month, according to Baker Hughes data. That’s down from 21 at the start of the year. The count climbed as high as 78 as hydraulic fracking boomed during the past decade.
As of January, Colorado ranked fifth in the country for crude oil production, and sixth for natural gas, according to the U.S. Energy Information Administration.
Editor's Note: This story was updated to correct the timing of the release of Extraction's statement.