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The oil and gas industry is one of the most volatile sectors in the US economy. The boom or bust performance of commodities such as oil and gas can make investments in the sector more risky than investors may appreciate. Brokers touted investments in energy companies to their clients as energy prices remained high and oil and gas companies prospered in the late 2000s.
The volatility of the energy sector was never more evident than the two-year period (2014-2016) and thereafter when oil and gas prices dropped precipitously. Companies that accumulated significant amounts of debt to fund and expand operations were unable to support the debt as energy prices dropped, resulting in a significant decline in revenue
If your broker made unsuitable recommendations to you to invest in one or more energy companies, and you lost money, you may be able to recover some or all of your losses.
According to media reports, more than 240 energy companies filed for bankruptcy protection in North America during that period. Many energy companies operate in the form of master limited partnerships (“MLPs”), which brokers recommended to their customers. MLPs are a type of limited partnership that combines the tax advantages of a limited partnership with the liquidity of a publically traded security.
The largest bankruptcy filing in the energy sector at the time was that of Linn Energy Inc. (NASDAQ: LINE). Linn filed for bankruptcy protection in May 2016. At the time, Linn was carrying $8.3 billion in debt. In the year prior to the filing, Linn’s share price dropped from $15 to $0.33 immediately prior to the filing.
Other notable energy companies which filed for bankruptcy and/or saw a significant decline in their stock/MLP share price were Samson Resources Corp., Vanguard Natural Resources, Energy XXI, Ltd., and Breitburn Energy Partners, LP.
Due to the underlying volatility of the oil and gas industry, investments in energy companies may not be suitable for many investors. Moreover, if investors become concentrated in a particular energy company, or in the stocks/MLPs of multiple energy companies, suitability concerns will also arise.
The securities industry provides an opportunity for injured investors to recover their losses. FINRA’s arbitration program enables aggrieved investors to file a claim seeking damages for investment losses and lost interest. In some cases, investors can recover the cost of filing a claim and their attorneys’ fees.
Lubiner, Schmidt & Palumbo are experienced securities arbitration attorneys. If you suffered losses in your brokerage account, or if you have questions or concerns regarding the handling of your account, contact us now for a consultation. We’ll work with to insure your right as an investor are protected to the fullest extent possible.