Offshore oil producer Fieldwood Energy on Thursday was sued by an insurance provider for allegedly failing to post $19.2 million in collateral for performance bonds, according to a Texas state court filing.
Aspen American Insurance Company issued the bonds roughly two years ago, but within the last 60 days requested that Fieldwood post $19.2 million in collateral, said Richard Fulton, an attorney representing Aspen in the lawsuit.
A Fieldwood representative did not immediately respond to a request for comment.
Debt ratings agency Fitch Inc in May downgraded Fieldwood's long-term issuer default rating two notches to C from CCC, signaling it was highly vulnerable to a risk of default. Fitch cited a "tenuous liquidity position" and weak hedging program for the downgrade, among other reasons.
Noble Energy, which sold its Gulf of Mexico assets to Fieldwood for $710 million in 2018, and the U.S. Department of Interior are parties that are protected by the bonds, according to Aspen's filing.
Offshore oil and gas companies have been hard hit by a steep decline in oil prices since March amid the spread of coronavirus and an unexpected price war.
"If they're in financial difficulties, then they won't have the financial wherewithal to post $19.2 million in collateral, but we've got to at least try," said Fulton. He declined to comment on why Aspen requested the collateral.
Representatives from Noble Energy and the Department of Interior did not immediately respond to requests for comment.
(Reporting by Liz Hampton; Editing by Steve Orlofsky)