Pain is quickly growing more acute in the New Year at beleaguered US shale companies as a global supply glut sinks crude further to 11-year lows, putting added financial stress on the most heavily indebted.
Debt and equity investors have all but given up on the exploration and production sectors, as oil prices tumble lower. In the last year, the SIG index of oil companies fell 42%, compared with a 0.6% decline in the Standard & Poor's 500 index, Reuters reported.
SandRidge Energy Inc, a once high-flying Oklahoma-based shale company backed by billionaire investors Leon Cooperman and Canada's Prem Watsa, was delisted by the New York Stock Exchange on Wednesday. The stock last traded on the NYSE for less than 20 cents a share. Though companies ended 2015 with enough cash on hand to cover interest payments for well into next year, they cannot afford to drill new wells. The gloomier outlook is expected to prod more of them to restructure and give up on trying to ride out a downdraft showing no signs of abating soon.
Oil is down 10% since Dec. 31 to $33 a barrel, falling away from the crucial $50 to $60 level that many shale companies need for long-term survival. "You are going to see a lot more bankruptcies and restructurings this year," said Bill Costello, an energy analyst at Westwood Holdings Group Inc. "This year is going to be much worse for companies with weak balance sheets."
He believes Penn Virginia Corp, Midstates Petroleum Company Inc, Ultra Petroleum Corp, GoodRich Petroleum Corp and Resolute Energy Corp, all small producers, will have to restructure.
Representatives for those companies did not comment.
Swift Energy Co, which stopped making some debt payments in December, filed for Chapter 11 on the last day of 2015.
Many companies have worked during the price declines of the last 20 months to push out debt maturities to curb repayment risks. According to filings by about 45 US shale oil producers, only a few have debt maturing this year.
But some investors do not want to take on more risk. For example, Chesapeake Energy Corp last month was unable to persuade a number of holders of its near-term debt to swap it for a later maturity, so in essence it could not push out its debts as much.
