Wednesday, September 9, 2009

It has Started: Natural Gas Producers Filing for Bankruptcy

As unfortunately reported here last week, we have the first natural gas casualty: Trident Resources has filed for Chapter 11 Protection. What is mindboggling is that it lists estimated assets in the range of $1 million to $10 million and estimated liabilities in the range of $500 million to $1 billion!

The reason is due to their hedging of loans attached to past natural gas prices (much higher prices).

The banks will be feasting on these junior companies. There will be many more to come.

Source: Reuters

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rtenne said...

The apparently large disparity b/w assets and liabilities is mostly a function of the fact that the US entities were used as a financing arm while the assets are mostly in Canadian entities not filed in the US bankruptcy.This is not to say that natural gas prices and currency fluctuations havent hurt this company, but it is misleading to simply compare the assets and liabilities listed in the petition.

The Shocked Investor said...

Thank you rtenne, a very good point for this company. The issue is what are the assets listed by the US entity. The other pressing issue of course is the strictly Canadian or American companies who cannot resort to accounting gimmicks - ether way. Hundreds of companies are likely in trouble and the banks and the acquirers will feast on them. Again, thanks,

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