Oil Patch’s False Bargains Burn Wall Street’s Would-Be Rescuers

Oil wells jet out of the scrubby, dusty ground in West Texas’ Permian Basin as far as the eye can see. A gas station off Route 285 bustles with workers in boots and baseball caps. Residents fret about the crumbling road, which has been pummeled by trucks barreling in and out of the oilfields. There’s nothing to suggest the distress that’s mounting in the busiest U.S. oil and gas region.

About 500 miles east, Houston is abuzz about another slump on the way. Restructuring expert Jay Haber, for one, has been fielding call after call from New York with ...