• 4 minutes THE GREAT OIL PRICE PREDICTION CHALLENGE OF 2018
  • 9 minutes Time For Reaction: Trump Presses OPEC to Reduce Prices as Crude Trades Near $80
  • 15 minutes Nothing new in Middle East? Iran Puts On 'Show Of Strength' Military Exercise In Gulf
  • 1 hour So oil touched $80! (WTI break $71 twice). What does the future hold?
  • 19 mins Global Hunger Continues to Grow Driven By Climate Change
  • 6 hours Why Are the Maldives Still above Sea Level?
  • 1 hour Praise for Alberta
  • 32 mins Downloadable 3D Printed Gun Designs, Yay or Nay?
  • 6 hours China Tariff Threatens U.S. LNG Boom
  • 5 hours Freedom Of Internet: Google Plans Censored Version Of Search Engine In China!
  • 18 hours Toyota Agreed To Add Android Auto To Its Vehicles
  • 1 day Robots Roam the Seafloor Looking for Mineral Resources
  • 4 hours Lack of Global Warming Messes with Russian Arctic LNG Plans
  • 1 day Transition Time: Volkswagen Announces "Electric for All" Campaign
  • 1 day Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 10 hours Regime For Regime: China Says Willing To Provide Venezuela With What Help It Can
  • 12 hours Jan's Electric bike replaces electric cars
Alt Text

The Biggest Risk In Today’s Oil Markets

The oil market is tightening…

Alt Text

Iran Sanctions Are Damaging The Dollar

Sanctions on Iran have bee…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

More Info

Trending Discussions

The End Of The Oil And Gas Bankruptcy Wave

Stock Market

Even as oil prices are rebounding, we are closing out one of the worst years for the oil and gas industry in decades. In 2016, the U.S. oil and gas industry defaulted on $39 billion in high-yield energy debt, more than twice as much as the $15 billion in defaulted debt in 2015, according to Fitch.

Many oil and gas companies were able to weather the storm at the end of 2014 and for much of 2015, only to run out of room this year. According to Fitch, one in three U.S. oil and gas exploration companies defaulted on high-yield bonds in 2016. Taking a broader measure of energy companies rather than just oil and gas, one in five companies defaulted on high-yield debt. That stands in stark contrast to the less than 1 percent of energy companies that defaulted in 2014.

But it isn’t just U.S. companies. Fitch points to Venezuela’s state-owned PDVSA, which has $13 billion in high-yield debt that is probably most in danger of default. PDVSA has seen production drop and has been raided by the Venezuelan government. With both the sovereign and the company essentially broke, it could be a matter of time before a default arrives. PDVSA succeeded a few months ago in convincing creditors to extend maturity terms on some of its bonds, buying it a bit of breathing room.

Related: Natural Gas Drillers Rush To Hedge Production As Prices Soar

A few other noteworthy bonds that are in shaky territory include Brazil’s Odebrecht Offshore Drilling, which has $3 billion in outstanding debt; California Resources Corp., which has $2.8 billion; and FTS International, a well completion company based in Texas, which has $800 million in high-yield debt.

While 2016 was a horrific year for the high-yield sector, Fitch says that 2017 will be much better. Rising oil prices will keep most companies out of danger. Fitch projects just a 3 percent default rate.

The rebound across the oil and gas industry is still in its infancy, but there are positive signs that the sector is on the mend. With just a few days left in December, only two upstream North American energy companies have declared bankruptcy, the lowest number since the beginning of 2016. According to Haynes & Boone, a Dallas-based law firm, more than 220 upstream and oilfield service companies have declared bankruptcy since the start of the downturn in 2014; but two-thirds of those came this year.

“The worst is over with oil prices moving up. Prospects are a lot better than they were a year ago,” Eric Rosenthal, an analyst at Fitch Ratings, said in a report. “The recovery of oil prices probably saved a few of them.”

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News