Major Oil Company Cox Operating Files for Bankruptcy, Leaving South Louisiana Businesses in Jeopardy

Metairie-based oil company Cox Operating LLC, one of the largest independent operators in Louisiana's shallow coastal waters, has filed for bankruptcy protection, putting dozens of south Louisiana service and supply companies at risk of their own bankruptcies. The executives at Cox Operating attribute the company's financial troubles to a combination of factors, including the pandemic, OPEC price wars, the hurricanes of 2020 and 2021, and an accident that damaged one of their oil platforms. According to bankruptcy court documents, Cox's estimated liabilities amount to nearly $500 million, with more than $200 million owed to small businesses in the Houma-Thibodaux and Acadiana areas. The court documents reveal that Cox followed a risky path that has led to financial troubles for other companies in recent years. The company acquired large fields of aging wells in shallow Gulf waters by taking on substantial debt. Local businesses that have relied on servicing the oil and gas industry, such as Keystone Chemicals, now find themselves deeply concerned about the situation. Jeff Delahoussaye, owner of Keystone Chemicals and a Cox creditor, stated, "If I can get the money they owe me, I can survive and move on. Some of the smaller companies are going to have to file for bankruptcy. It's going to have a domino effect." Cox Operating, founded in 2004, is a privately held company that operates over 600 wells in more than 60 fields located in shallow Gulf of Mexico waters, primarily off the coast of Louisiana. The company purchases aging wells abandoned by larger oil companies and operates them through Cox-affiliated entities registered in Louisiana and Texas. The deep offshore waters are now dominated by major companies like Chevron and BP. Oil and gas production in the shallow Gulf has been declining over the past two decades. Operating these older wells can still be profitable when oil prices are high, but during the pandemic, prices plummeted, causing significant difficulties, especially for a highly indebted company like Cox Operating. At the time of its bankruptcy filing in mid-May, Cox Operating employed over 430 people across its offices in Houston, Dallas, and Metairie. The company estimated its assets and liabilities to be between $100 million and $500 million, but subsequent court documents suggest that the debt exceeds $500 million. Cox Operating owes $250 million to BP and $80 million to Amarillo Bank. An additional $8 million in bond premiums is owed to guarantee the performance of plugging and abandonment obligations. Furthermore, the company owes $211 million to unsecured trade creditors, with three-quarters of them located in south Louisiana. One of the largest trade creditors is Gulf Offshore Logistics in Raceland, which is owed $24.7 million for providing offshore marine transport to Cox. Numerous other creditors, such as Danos and Total Production Supply, are also facing substantial losses. Experts believe that Cox's bankruptcy is another sign of the depressed state of the Gulf of Mexico's shallow waters, which are unlikely to see a revival. The increasing costs of plugging older, abandoned wells further compound the challenges. Gregory Upton, Interim Executive Director at LSU Center for Energy Studies, reveals that the cost of plugging the 14,000 unplugged, nonproducing wells in the Gulf amounts to $30 billion. The fate of Cox's operated wells remains uncertain. In the past, other companies declaring bankruptcy have avoided the responsibility of plugging abandoned wells. Suppliers, such as Jeff Delahoussaye, testified in court that Cox had denied rumors of financial difficulties while continuing to order supplies and services on credit, eventually leaving creditors with significant losses. Delahoussaye and other local businesses argued to keep the bankruptcy case in Louisiana, but Cox filed its own voluntary Chapter 11 petition for bankruptcy protection in the U.S. Southern District of Texas, a venue considered more favorable for indebted companies. The case was transferred to Texas, disappointing the local creditors. It remains unclear whether Cox will convert its case to a Chapter 7 liquidation or pursue a reorganization plan. Previous attempts to restructure the company's debt were unsuccessful, as stated in court documents. Although impacted workers in related petrochemical businesses are likely to find new jobs relatively easily, financial and trade creditors will bear the brunt of the bankruptcy's consequences.