Hard times for the oil and gas industry—what a year, 2015—insolvency issues. Tis true that the oil and gas industry runs in cycles, but this transition to bust has been fast and furious. Looking back at 2015 is hard enough. How about looking ahead? Turning off the spigot is having its consequences, all up and down the industry. The list of pressure points and potential losers can be long.

Producers, service providers and their lawyers are turning their attention to insolvency issues.  Cash is in short supply for many. Debts continue to come due. The boilerplate terms of the Master Service Agreements, ignored in the haste to get to work, may now become the focus of scrutiny when money is so tight.

The first issue to confront in times of insolvency is . . . timing.

Know your deadlines.

What does that contract say about the time for making payment? When does interest begin to accrue (and in what amount)? What does the Ohio statute provide as the last date that a contractor may file a lien? Knowing these key points helps define the relative leverage and determine strategies.

No time like the present – realistic assessment of the present situation and options.

What is the present ability for the debtor to perform? How long can the creditor forbear from receipt of cash before it has its own creditor-debtor issues? What promises are being made and can be kept? And, the higher that the person making the promise is in the hierarchy, the higher the level of commitment should be. And, monitor other channels because reliable (and unreliable) communications are often passed along in the marketplace.

How much time should the process take?

There may be no clear answer. Of course, time is generally not on the side of creditors. But, time can help debtors manage. And time may permit business solutions, e.g. future work, to solve the current issues. Of course, there are judgment calls to be made. Trust and understanding come from direct, accurate discussions and timely performance.

There is more to come on debtor and creditor issues in 2016.