Securities Lawyers Blog
The law offices of Gana Weinstein LLP are currently investigating investors who have suffered losses in in now bankrupt oil and gas company, American Eagle Energy Corp. (Stock Symbols: AMZG) (American Eagle Energy). American Eagle Energy is a Colorado, Littleton-based company that buys and develops wells in the Williston Basin of North Dakota. American Eagle Energy filed for chapter 11 bankruptcy in May 2015.
Our offices continue to report on investment losses suffered by investors in various oil and gas investments that brokerage firms have increasingly recommended to retail investors in recent years. These investments include private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and even individual stocks.
Oil and gas related investments have been recommended by brokers under the assumption that oil & gas would continue to be sold at around $100 and increase steadily over time. However, last summer the price of oil & gas plummeted due to a strengthening dollar and increased global supply of oil and remains below $60 to this day. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.
Before recommending investments in oil and gas companies, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company.
In the case of oil and gas investments, many of these companies, such as American Eagle Energy, took on enormous amounts of debt in order to engage in exploration activities that could only make sense if the price of oil remained high. As reported by the Wall Street Journal the drop in oil prices and the industry downturn has made it difficult for the company to refinance its debts.
American Eagle Energy has been negotiating with the holders of its $175 million in bond debt since skipping its March 2 payment. American Eagle Energy agreed to make a partial interest payment early in April 2015, to allow negotiations to continue for another month but that agreement expired allowing bondholders to take action against American Eagle.
American Eagle filed for bankruptcy listing assets of $221.9 million and debts of $215.2 million. The company reported $6.9 million in oil and gas revenues for in the quarter ending March 31, resulting in a loss of $50.7 million.
American Eagle Energy is only the latest among a number of other oil and gas companies that have gone bust recently, including BPZ Resources Inc., Quicksilver Resources Inc., RAAM Global and Sabine Oil & Gas Corp.
Brokers who sell oil and gas products are obligated to understand the risks of these investments and convey them to clients. Investors who have suffered losses may be able recover their losses through securities arbitration. Our consultations are free of charge and the firm is only compensated if you recover.