July 9 (Reuters) - A wave of oil and gas bankruptcies in North America is likely to continue this year as oil prices remain depressed and a new surge of COVID-19 cases threaten to stall any recovery in fuel demand, law firm Haynes and Boone said in a report released this week.
Bankruptcies surged in the second quarter, including from major shale independents Chesapeake Energy and Whiting Petroleum , as oil prices collapsed due to the pandemic and a brief, unexpected price war between Saudi Arabia and Russia.
There were 18 producer bankruptcies in the second quarter, according to a report compiled by law firm Haynes & Boone, the highest quarterly figure since the second quarter of 2016, when there were 34 bankruptcies. In total, 23 oil producers and 18 oilfield service firms have sought protection from creditors this year.
U.S. crude oil futures are currently about $40 a barrel, a level that "is not a sufficient clearing price for many heavily leveraged shale producers," the report said.
Lawyers for the firm warned that a recent resurgence in COVID-19 cases around the world would likely hurt near-term demand growth for fuel.
"Lower for longer remains the watchword for producers and their creditors," attorneys wrote.
In the second quarter alone, producers filing for bankruptcy held over $29 billion in debt, with shale pioneer Chesapeake Energy accounting for $9 billion of that. In total, exploration and production firms filing for bankruptcy this year have $30.6 billion in debt.
Oilfield service firms that filed in 2020 had $23.8 billion in debt, led by Diamond Offshore Drilling at $11.8 billion. (Reporting by Liz Hampton Editing by Marguerita Choy)