Riviera Finance August 8, 2019 No Comments

Bankruptcies in the Oil IndustryOne of the biggest shifts in the U.S. economy in recent years is the drastic increase in oil production. The U.S. has increased oil production more than 60 percent since 2013, to more than 12 million barrels per day. While the U.S. once had to import most of its oil, it’s now the world’s largest oil producer.

This seems like it should be great news for the U.S. economy. After all, oil drives so much of the economy in industries from transportation to hospitality. However, there can be a downside to all this growth. Whenever we see a spurt in growth, there are losers as well as winners. There’s also been a recent cutback in oil production that many businesses weren’t prepared for. While the oil industry as a whole is still strong, there have been quite a few bankruptcies in the oil industry recently.

 Bankruptcies in the Oil Industry

Almost 180 oil and gas companies have gone bankrupt in the last five years. The most recent victim has been Weatherford International PLC, a large Swiss-based company that was recently worth $12 billion filed for bankruptcy last month. Even though oil production in the U.S. is still high by historical standards, there’s been a slowdown recently. A Dallas Fed Survey suggests that oil drilling in Texas, Louisiana and New Mexico have slowed in 2019, which could foreshadow further problems.

The increase in U.S. oil production has been a mixed blessing to the American economy. In addition to profits for the most successful companies, it provided many jobs in the oil industry. However, energy-related businesses are, by nature, volatile. Conditions change quickly and depend on many factors. Even as America produces more oil, international conditions still have a strong impact on prices. For example, recent tensions between the U.S. and Iran have contributed to spikes in oil prices. In an industry affected by so many factors, it’s almost impossible to predict the near much less long-term future.

 How Businesses Can Protect Themselves

In an industry fraught with volatility, it’s important for businesses to exercise caution as they plan for the future. Businesses in these sectors should be careful about extending credit to customers. Customers’ credit should always be checked and evaluated for signs of looming financial problems.  Non-recourse invoice factoring is a practice that can help protect companies from credit risk, as well as cash flow problems. Non-recourse factoring provides credit insurance, removing the risk of your not getting paid if your customer files for bankruptcy.

Riviera Finance has been providing financial services to oil and gas companies for more than five decades. Invoice factoring can help businesses such as crane operators, roughneck crews, heavy haulers, roustabouts, swampers, riggers and others. If you are in any type of business connected to the oil industry, invoice factoring can help you offset the risks that you otherwise incur. Here are some of the leading benefits of energy industry factoring

  •    Receive immediate cash for your invoices. Get paid within 24 hours.
  •    You get credit protection so you aren’t at risk if your customers don’t pay.
  •    Credit approval is based on customers’ credit rather than yours.
  •    Enjoy greater security and working capital.

No one can predict what will happen in the energy sector in the future. More bankruptcies are likely to occur, so if your livelihood depends on businesses in this sector, make sure you take steps to protect yourself.  Invoice factoring can help you enjoy better cash flow and shield you from economic uncertainty.

Riviera Finance can provide funds from $10,000 to $2 million per month to help you better manage your company’s finances. Learn more about our energy funding services.