What does the drop in oil prices mean to the Texas legal market? The Texas Lawyer tackled this question recently in 2 separate interviews with Tim Shelby a Partner with AZA in Houston and Lydia Protopapas a Partner with Winston Strawn in Houston.
The drop in oil prices will lead to a decrease in drilling, which will be followed by a drop in production. With less drilling activity you will have a diminished demand for oilfield services, tools and equipment.
Litigation is going to increase significantly. Specifically litigation related to contracts on oil field equipment and litigation related to joint ventures that are no longer profitable. The most interesting thing that Shelby said was that much of this litigation would go to law firms with more reasonable bill rates, where clients get strong value for their budget. He sees energy litigation spiking in the 2nd half of 2015 and staying strong through 2017.
With the drop in prices E&P companies will be faced with lower valuations on their reserves, which will impact their borrowing bases. This change in borrowing base will force E&P companies to restructure. With the decrease in revenues for oil field service companies they will also be forced to restructure existing debts or liquidate assets to generate cash. Whether it is through formal bankruptcy proceedings or through out of court restructurings Bankruptcy attorneys will see an increased demand for services.
Firms should consider acquiring talented bankruptcy attorneys and energy litigators now, while their demand is still low. In addition, firms should consider relaxing their portable business requirements for lateral energy litigation partners with the expectation that books stand a chance to significantly increase in value over the next 18 months.
Rahul D. Yodh is a Principal of Link Legal Search Group, a boutique legal search firm that provides lateral attorney recruitment and contract attorney services to law firms nationwide. For more information on Link Legal Search Group, please visit www.linklegalsearch.com