[Editor's note: A version of this story appears in the February 2021 issue of Oil and Gas Investor magazine.]

Much like The Beatles’ Paul McCartney sang in 1970, U.S. oilfield services (OFS) companies have “seen this road before,’” but the climb from the bottom of the 2020 version of the historic oil patch trough feels extra daunting—a road paved with uncertainty. The service industry was collateral damage of the unprecedented combination of excess supply and crippled demand that waylaid its client base at a time money was fleeing the industry and a global pandemic was settling in.

The current market stresses have created a proliferation of what some have termed “zombie” companies in the OFS sector. These are service providers that are highly cash impaired and loaded with debt. While many E&Ps in this condition have taken the bankruptcy plunge, some believe there are still holdouts on the services front that will eventually fall.

“We’re probably midway through [the bankruptcy cycle],” according to James West, senior managing director, oilfield services, at Evercore ISI. “We’ve had a large number of bankruptcies, but there are more to come. Most management teams have engaged with lenders at this point. Maybe they haven’t filed for Chapter 11 or Chapter 7, but that is kind of a formality at this point.”

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