Offshore oil producer Fieldwood Energy LLC on June 11 was sued by an insurance provider for allegedly failing to post $19.2 million in collateral for performance bonds, according to a Texas state court filing.
Aspen American Insurance Co. issued the bonds roughly two years ago, but within the last 60 days requested that Fieldwood post $19.2 million in collateral, said Richard Fulton, an attorney representing Aspen in the lawsuit.
A Fieldwood representative did not immediately respond to a request for comment.
Debt ratings agency Fitch Inc. in May downgraded Fieldwood's long-term issuer default rating two notches to C from CCC, signaling it was highly vulnerable to a risk of default. Fitch cited a "tenuous liquidity position" and weak hedging program for the downgrade, among other reasons.
Noble Energy Inc., which sold its Gulf of Mexico assets to Fieldwood for $710 million in 2018, and the U.S. Department of Interior are parties that are protected by the bonds, according to Aspen's filing.
Offshore oil and gas companies have been hard hit by a steep decline in oil prices since March amid the spread of coronavirus and an unexpected price war.
"If they're in financial difficulties, then they won't have the financial wherewithal to post $19.2 million in collateral, but we've got to at least try," said Fulton. He declined to comment on why Aspen requested the collateral.
Representatives from Noble Energy and Interior Department did not immediately respond to requests for comment.
It is Wall Street, not Washington, that has put the clamps on growth in America’s oil patch, argues the Financial Times’ Houston correspondent.
Carlyle-backed Lone Star Ports agreed to lease 200 acres along the port of Corpus Christi where it has proposed an oil export terminal and docks to load U.S. shale onto supertankers.
Offshore operations in the Gulf of Mexico will thrive with improving economics, while in the shale fields ... not so much; a new generation of leaders takes over following the retirement of a slew of industry icons, and just in time to tackle investor pressure on ESG issues, continuing consolidation and the pursuit of capital; and then there's the 2020 U.S. presidential election, in which the subject of energy is likely to play a prominent role.