Securities Lawyers Blog
The investment attorneys at Gana Weinstein LLP continue to report on investor losses in oil and gas related investments. Our firm is investigating potential securities claims against brokerage firms over sales practices related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, bonds, and individual stocks.
The fall of Samson Resources Corp. (Samson Resources) has been called a Wall Street blooper by and editorial in the Wall Street Journal. As a background, private equity firm KKR (Stock Symbol NYSE:KKR) announced the purchase of oil and gas producer Samson Investment Company’s onshore US assets in a 2011 deal worth $7.2 billion. The acquisition occurred when oil prices were near $100 per barrel and small independent shale oil producers were being acquired with PE ratios often above 50 but little to no positive cash flow to show that would justify the valuations. Now four years later and Samson Resources, under KKR’s ownership, has filed for bankruptcy and is currently undergoing restructuring. The August 2015 bankruptcy announcement precipitated a drop in KKR’s stock price of nearly 40%.
Billions of dollars from investors pumped into Samson Resources evaporated with the chapter 11 bankruptcy filing. The company’s planned reorganization intends to wipe out the $7.2 billion invested by KKR and others in a 2011 leveraged buyout. The plan would also nearly erase Samson’s $2.25 billion in bond debt held by Blackstone Group. The continued failure of oil price recovery has reduced credit traders’ view of Samson Resource’s prospects for emerging from bankruptcy as a profitable company.
Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. 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 and commodities related investments, 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. Many of these companies relied upon high energy prices in order to sustain their operations. As reported by the Wall Street Journal the drop in oil and energy prices and the industry downturn has made it difficult for many companies to refinance their debts.
Brokers who sell oil and gas and commodities 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.