If your financial advisor recommended an investment in All American Oil & Gas (“AAOG”) stock, limited partnership units, or high yield (“junk”) bonds, you may be able to recover losses sustained through FINRA arbitration, in the event your broker lacked a reasonable basis for the recommendation, or if your financial advisor failed to disclose the many risks associated with an investment in AAOG. Headquartered in San Antonio, TX, AAOG is a privately held oil and gas producer that is the parent company of subsidiaries Western Power & Steam, Inc. (“WPS”) and Kern River Holding Inc. (“KRH”), an upstream exploration and production outfit with approximately 124 producing wells in the Kern River Oil Field. Together, AAOG, WPS and KRH are referred to as the Company.
On November 12, 2018, the Company filed for Chapter 11 bankruptcy in U.S. District Court in the Western District of Texas, citing “an ongoing dispute with its lenders.” As of the date of filing its petition, the Company has a total of $141,942,197 in debt obligations. According to the bankruptcy petition, in a number of instances KRH is the borrower on the Company’s loan facilities, as it requires regular ongoing cash flows to maintain its exploration and production activities.
With U.S. crude oil now trading below $50 per barrel (in 2014 oil was trading around $100, and as recently as September 2018 was hovering around $80 per barrel), many oil and gas companies may now be encountering financial distress after leveraging their balance sheets in order to fund costly exploration, drilling and related operations. Predictably, this overleveraging has placed some oil and gas companies in a precarious financial position, particularly those operating in the capital-intensive and risky upstream sector of the oil and gas market.