[Editor's note: This story will appear in the June 2020 edition of Oil and Gas Investor. Subscribe to the magazine here. It was originally published May 26, 2020.]

April has become a kind of cliché for bad months—T.S. Eliot’s cup runneth over—but what a mess this one left behind for May. Forget the hand sanitizer—this requires the magic of Clorox.

This is a tough environment in which to live, let alone make oil and gas deals. Still hanging in the May air is the raw sting of enmity, childish China-blaming and the constant uptick of coronavirus deaths.

The deals, such as they were, mainly involved last-minute reshoots, as bad a sign in M&A as in the movies. Devon Energy Corp. rebooted its Barnett Shale asset sale, potentially adding $60 million to the price from buyer Kalnin Ventures LLC. Alta Mesa Resources Inc.’s editing room floor, already slick with splices, saw another $100 million leak out of its deal with Mach Resources LLC as the company struggled to escape from bankruptcy.

So it went with HighPeak Energy and blank-check company Pure Acquisition, which dropped plans to include Grenadier Energy Partners II in a new company. And same story with BP Plc’s Alaska sale to Hilcorp Energy Co.

Even the once safe, if demoralizing harbor of bankruptcy is now showing symptoms that it, too, is within the pandemic’s grasp. Fitch Ratings said on May 4 that recent bankruptcy cases have gone off the rails as exit financing begins to wobble.

Bankrupt EP Energy, for instance, was ready for takeoff in March following a federal judge’s approval. The company’s debt was set to be reduced by $3.3 billion with majority equity ownership falling to holders of certain lien notes. Then the oil and gas values that underpinned the reorganization fell into a pandemic-sized hole.

The rapid collapse of the EP Energy’s bankruptcy plan stunned Judah Gross, an attorney and director at Fitch. “I’ve never seen that before in my history of practice,” he said.

As if in step with handwashing guidelines, debt seemingly takes longer to scrub off now. Lender disinterest for equitized debt and a lack of “third-party interest in certain distressed assets” has also disrupted the previrus Chapter 11 bankruptcy world, Gross said.

Those disruptions are “most pronounced in energy and retail as opposed to all other sectors,” he said. “Energy [has experienced disruptions] because of the [collapsed] oil demand and the abruptly falling oil prices and retail just because of the lockdown.”

Worse still is the fate of oil and gas in the hands of its adversaries. In Sun Tzu’s day, it was considered wise to leave a desperate and surrounded foe with an exit. Today’s maxim: It’s not enough to see an opponent beaten—they must be humiliated, too.

In a sign of this age’s rancor, critics of President and Chief Medical Officer Donald J. Trump have taken to mimicking his chaos game theory. Consider Tom Sanzillo, director of finance for the Institute for Energy Economic and Financial Analysis, who argued on April 27 that qualifying oil and gas businesses shouldn’t be eligible for loans that would enable them to pay employees.

Sanzillo sings to the choir about the sector’s poor showing with investors and lenders the past couple of years. He delivers his TKO of the sector by arguing that any funding to the oil and gas industry is “a waste of taxpayer money.”

As of May 11, nine public oil and gas companies had taken Small Business Administration loans—$29.7 million, or about two one-hundredths of the $1.2 trillion bailout program.

This Trumpian argument appears meant to inflame rather than persuade. It fits neatly with “windmill cancer” and “buy Greenland”—phrases more suited to safe words than talking points.

How far can this animosity, which threatens more than just oil and gas deals, go? The vibe is 1912, which isn’t good.

Roughly a century ago, presidential candidate Theodore Roosevelt took the stage at a gathering of Milwaukee Progressives whereupon he declared he’d just been shot.

“Fake!” a skeptical onlooker cried. Roosevelt, aggrieved by what he considered rigged or stolen elections, obligingly opened his coat to show blood oozing from a .38 caliber wound. An eyeglasses case and a 50-page speech had slowed the bullet’s passage toward the center of his chest, according to History.com.

“It is a very natural thing,” Roosevelt told his stunned audience, “that weak and vicious minds should be inflamed to acts of violence by the kind of awful mendacity and abuse that have been heaped upon me for the last three months by the papers.”

Any of this sound familiar? If it helps, oil prices were probably about the same.

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