COVID-19 PANDEMIC MADE THREE QUARTZ SAND SUPPLIERS GO BANKRUPT

The crisis in the oil and gas industry, caused by the COVID-19 pandemic, has led to a decline in the activity of American shale producers.  The slowdown in drilling has prompted three North American companies involved in the extraction of quartz sand used for hydraulic fracturing (hydraulic fracturing sand) to apply to the court for bankruptcy protection.  And that's just for the last five weeks.

Hi-Crush Inc. Company from Houston filed an application last Sunday.  The company asked the court to protect it from the creditors during the reorganization period, as the 11th chapter of the US bankruptcy code allows.

The announced reorganization was required as a part of an agreement reached by the company's management with 94% of Hi-Crush securities holders.

The company, although it owns $ 953 million in assets, has serious debts of almost $ 700 million. After the debt restructuring, the company would be able to improve its balance sheet and increase financial flexibility in the long term, said its CEO Robert Rasmus.  The company became the third in the United States to file for bankruptcy amid an all-time low in oil prices in 2020 and a sharp decline in demand, forcing many oil and gas producers to close mines.

Ohio-based Covia filed a similar claim.  The company is also seeking to get rid of more than $ 1 billion debt and accumulated costs.

Covia supplies minerals for the oil and gas industry. 

The head of the company, Richard Navarre, noted that the restructuring procedure would allow the company to continue operating as usual, paying salaries to the employees.
The company has cash reserves of about a quarter of a billion dollars.  During the first hearings, Judge David Jones ruled that the company could use this money both to finance current expenses and to carry out the procedures necessary for bankruptcy.
The experts draw attention to the fact that the market capitalization of the company has recently fallen sharply.  Now it is about $ 63 million. For comparison, in May 2018, analysts estimated the capitalization at $ 3 billion.

In the statement itself, the company’s  representatives indicated an overall valuation of assets and liabilities ranging from $ 1 billion to $ 10 billion.

 The third company to initiate its own bankruptcy was Vista Proppants.  It had accumulated debts of $ 394 million, which could not be repaid promptly.
Vista Proppants & Logistics LLC was involved in the production and distribution of hydraulic fracturing sand as well. It worked in collaboration with two investment companies - First Reserve Corp.  and Ares Capital Corp.

For transportation and delivery of products to the consumers, the company used railway cars, the lease of which became unprofitable against the backdrop of the economic crisis.

 The company now has the opportunity to undergo restructuring and improve business profitability.