For next-cycle reference, a few words and conditions should be alarming to oil and gas producers and investors, says Jim Parkman, co-founder of energy investment-banking firm Parkman Whaling LLC. Set the alarm for words like “contained” and “peak oil,” and watch-out for “the super-abundance of capital.” Add “insatiable” in there too, as in “insatiable demand.”

“When you hear the use of the word ‘contained’ by thought leaders and politicians that something is contained to one sector, that is a red flag,” Parkman says in the videocast at 10 a.m. CST, Thursday, Feb. 25, “Jim Parkman’s Observations On The Recent Reorg Cycle, And Forward Markets.” The videocast of his remarks will be accompanied by a live Q&A with webinar attendees.

Parkman Whaling has worked, since oil and gas prices peaked in the summer of 2008 on the restructuring/reorgs of Energy Partners Ltd., Edge Petroleum Corp., Foothills Resources, Beryl Oil and Gas, Bigler, Storm Cat Energy Corp. and four other energy companies, representing debtors in seven, creditors in two and investors in one. Among the 10 recent bankruptcy/reorg assignments, eight involved Chapter 11 cases and two were out-of-court resolutions. Two resulted in asset sales, three were closed with debt-for-equity transactions, two resulted in reorganization and merger, and three remain under way.

The hyper-inflated mortgage market of early 2008 was supposed to be contained to that sector, he notes; it was not.

As for peak oil, talk of this in 2005-08, combined with an incredibly weak U.S. dollar and a terrorism premium, helped to drive oil prices to nearly $150 in July 2008. “’Contained’ and ‘peak oil’ are two good signs that we’re heading to another meltdown,” Parkman says.

And, then there is the super-abundance of capital that was targeting oil and gas production in early 2008. Parkman presented in an energy-capital program in June 2008 in which he cited more than $10 billion in private-equity capital ready to invest in start-up E&P companies.

“I should have known it then,” he says of the red flag. “That was enough capital to form, comfortably, 100 new start-ups.”

In the past up-cycle, “there were, literally, companies formed with no money down.” Investors are trying to recover that investment now. “I know at least one of them,” he says.

The up-cycle begins with burned-investor contempt that becomes optimism and full commitment. Those who stick through the new up-cycle into the next down-cycle end up with contempt. In working on reorgs and recaps, often, “the client company may be in stage of depression while investors are in a stage of contempt.”

Tricky business.

Helping prevent fire sales in this past E&P down-cycle has been a perpetrator itself: the credit crunch. Potential fire-sale buyers have had limited access to capital themselves, he notes.

Parkman discusses the Chapter 11 reorganizations and stalking-horse strategies of three, recent, high-profile bankruptcies, with some surprising results: Crusader Energy, Edge Petroleum Corp. and TXCO Resources.

In the end, cash flow foretells the story. Parkman describes this leading indicator of going-forward unworthiness in the webinar “Jim Parkman’s Observations On The Recent Reorg Cycle, And Forward Markets” at 10 a.m. CST, Thursday, Feb. 25, that includes Parkman’s slides and a live Q&A.

–Nissa Darbonne (, E-Editor, Hart Energy Publishing; Oil and Gas Investor, A&D Watch, Oil and Gas Investor This Week, Today,,,, Today,, E&P Buzz,, PGT News,, FUEL.