Bankruptcies are rising among American oil companies as Wall Street’s disaffection with shale companies reverberates through the industry.
Twenty-six U.S. oil-and-gas producers, including Sanchez Energy Corp. and Halcón Resources Corp., have filed for bankruptcy this year, according to an August report by the law firm Haynes & Boone LLP. That nearly matches the 28 producer bankruptcies in all of 2018, and the number is expected to rise as companies face mounting debt maturities, The Wall Street Journal reports.
Energy companies with junk-rated bonds were defaulting at a rate of 5.7% as of August, according to Fitch Ratings, the highest level since 2017. The metric is considered a key indicator of the industry’s financial stress.
Many drillers financed production growth by becoming deeply indebted, betting that higher oil prices would sustain them. But investor interest has faded after years of meager returns, and some companies are struggling to meet their obligations as oil prices hover below $60 a barrel.
Private companies and smaller public drillers have, to this point, been hit hardest. Those producers collectively generate a large portion of U.S. oil, according to consulting firm RS Energy Group, and their distress reflects issues affecting all U.S. shale. Read the full story.
