Crashing crude oil prices this year have wrecked the finances of most oil and gas companies. Some have experienced such financial hardship that they've had to declare bankruptcy. The longer oil prices remain lower, the more this list is likely to grow.

Investors need to brace themselves for more turbulence ahead in the sector. Several notable companies are likely to declare bankruptcy over the next few months, which could cause significant volatility in the oil market.  

A sign that says bankruptcy ahead.

Image source: Getty Images.

A growing gusher of bankruptcy filings

More than 400 companies in the oil and gas industry have already declared bankruptcy this year, according to Bankrupcydata.com. That's the fifth highest total. While most of those seeking to restructure their debt were small privately owned companies, several notable names have gone bankrupt this year. 

Topping the list so far was McDermott International, which had $8.75 billion in assets when it filed in late January, well before crude prices crashed. It's the fifth largest company to file this year. Joining it in the top 10 were Whiting Petroleum (NYSE:WLL) and Diamond Offshore Drilling (NYSE:DO), both casualties of this year's oil price crash. Both had substantial indebtedness -- more than $2 billion apiece -- that they intend on restructuring through bankruptcy. Meanwhile, several other publicly traded oil companies have also filed this year, including Ultra Petroleum (for the second time in the past few years) and Extraction Oil & Gas.

Teetering on the brink

That list of bankruptcies will undoubtedly grow in the coming weeks, since several oil companies are about to default on their debt. The biggest name is Chesapeake Energy (OTC:CHKA.Q), which could file as soon as this week. The clock is ticking after Chesapeake chose not to make roughly $13.5 million of interest payments due on June 15. It now has 30 days to make that payment before it's in default. In addition to those interest payments, Chesapeake has several hundred million dollars of upcoming debt maturities to address this summer. 

California Resources (NYSE:CRC) is also on the brink of bankruptcy. Like Chesapeake, California Resources didn't make a recent interest payment on its debt. While creditors granted it an additional extension past the grace period, it has only until the end of the month to make that payment before it's in default. Thus, it seems likely that the company will declare bankruptcy by the end of this month. 

Offshore driller Valaris (NYSE:ESV) is in a similar boat. The company chose not to pay $26 million of interest on debt due on June 1 and another $13.3 million interest payment due on the 15th. While it has a 30-day grace period, and its lenders granted it a default waiver, it seems like Valaris will declare bankruptcy in the coming weeks to restructure this debt.  

As these companies officially file, it will probably force others to join them. According to an estimate by auditor Deloitte, 30% of U.S. oil producers are technically insolvent, while another 20% have "stressed financials." Because of that, there's a massive pool of potential bankruptcy candidates within the oil patch. With so many companies struggling financially, stock prices are likely to remain under pressure as the industry sorts out its issues.  

Bank on a steady stream of bankruptcy filings

This year's oil price crash has pushed many oil companies to the brink. Several have already gone bankrupt while many others are heading that way. This upheaval is likely to have a lasting impact on the sector, as it will be a lot more challenging for oil companies to obtain financing in the future, given how badly creditors have gotten burned this year. That will also make it more challenging for the sector to create value for investors when market conditions improve, since financing is the lifeblood of this capital intensive industry.