Oil demand cratered last year because of the COVID-19 outbreak. The pandemic caused crude prices to plummet, wreaking havoc on the oil industry. The downturn unleashed a wave of bankruptcies across the oil patch, as financially struggling companies had no other option to restructure their burdensome debt.

While market conditions have improved in recent months, several oil stocks remain on fragile footing. We likely haven't seen the end of the current bankruptcy wave. Here are a few energy stocks that might file for bankruptcy before the end of the year.

An offshore oil rig platform with the sun rising on a frozen sea.

Image source: Getty Images.

The next domino to fall?

Nearly the entire offshore drilling industry filed for bankruptcy last year. One of the few companies left standing is Transocean (RIG -3.89%). However, the company is teetering on the brink, given its near-term financial commitments.

On the one hand, Transocean has $1.7 billion of cash and short-term investments along with $1.3 billion of available credit. Meanwhile, thanks to its strong contract backlog, it expects to generate between $900 million to $1.1 billion of operating cash flow over the next two years. However, Transocean has $1.7 billion of capital spending requirements and $1.5 billion of debt maturing through the end of next year. It's on track to burn through most of its liquidity. While the offshore driller is looking at various options -- like debt exchanges and new secured financing on some of its vessels -- it might have no choice but to file for bankruptcy to restructure its liabilities and gain some more breathing room.

Fighting hard to stay afloat

Callon Petroleum (CPE) has been feverishly working to shore up its financial profile amid the turbulent market conditions. The oil producer had some success as it increased its liquidity to nearly $600 million at the end of the third quarter by reducing its net debt by $160 through asset sales and a debt exchange.

However, the company still has a tough hill to climb. It has borrowed about $1 billion on its credit facility and has $3.2 billion of total long-term debt outstanding. That's concerning, since its banks recently reduced its borrowing capacity to $1.6 billion due to low oil prices.

If crude cooperates, Callon Petroleum could continue chipping away at its debt and stay afloat. However, if prices take another tumble this year, the company might have no other choice but to file for bankruptcy to restructure its debt.

Its liquidity is drying up

Centennial Resource Development (PR -0.40%) is in a similar boat as Callon Petroleum. The oil producer is fighting to stay afloat amid the turbulent conditions in the oil market. The company seemed to enter 2020 in decent financial shape. It had $10 million in cash, had only borrowed $175 million on its $800 million credit facility, and had $900 million in other debt outstanding, giving it $634 million of liquidity. 

However, crashing crude prices significantly impacted its financial situation. It burned through cash while its banks cut its borrowing base to $700 million. As a result, it ended the third quarter with only $314 million of liquidity.

If oil prices cooperate, Centennial Resource Development should be able to generate free cash flow, giving it the funds to chip away at its debt. If not, its liquidity could run dry, which would likely force it to file for bankruptcy.

High-risk oil stocks

Transocean, Callon Petroleum, and Centennial Resource Development are all on thin financial ice. They're at high risk of filing for bankruptcy if oil prices nosedive again. Meanwhile, even if they make it through the year, their weak financial profiles could cause their shares to underperform rivals. Investors should steer clear of these financially troubled oil stocks.