U.S. ENERGY DEBT: $370 BLN
The U.S. energy sector is facing $370 billion of debt, a number that has more than doubled in the past decade. But even as oil rebounds off 13-year lows, many energy companies are struggling to stay afloat.
To simply make the interest payments on the debt, energy companies shelled out $16.7 billion last year—about half of their total operating profit, according to data compiled by FactSet and Yahoo Finance.
The figures from the past quarter are increasingly grim: 86% of energy sector operating profits were used to cover the interest payments on debt.
"Servicing debt is a huge component right now, which is why they need a higher oil price," said Dan Dicker, President of MercBloc. "But even if they were able to service...the question becomes how will they be able to raise capital when these notes come due?"
While $5.1 billion of U.S. energy debt matures this year, $25.1 billion will mature in 2017. The number risies to $52.5 billion in 2020.
"There's not a lot of this debt that comes due in 2016. But in 2017—that's when the rubber will really hit the road. Now a lot of these companies are already looking to bankruptcy because people know that the bond position is untenable," said Dicker.
Currently 70% of oil and gas producers have bond ratings below investment grade, according to S&P and FactSet. Last year, debt defaults topped 100, a level not seen since the financial crisis, with energy companies accounting for about one-third of the total.
Even the recent rise in oil prices won't be enough to repair the damage for many energy companies, notes Michael Cohen, head of energy commodities research at Barclays. "The leverage at these prices is in the 7 to 9 range, so even prices going back up to $50 or $60 is not going to help that immensely," Cohen said.
On Monday, SandRidge Energy filed for bankruptcy with $4.1 billion in debt, the fifth energy company to file for bankruptcy in the past week. Since the start of 2015, over 50 oil and gas producers have gone bankrupt, and the situation is dire for hundreds more companies, according to Deloitte.
"[Oil's recent rise] is not enough," said Dicker. "You can't find the financing to keep the lights on at $50 oil. Most of these guys won't be able to keep the lights on at $65 or $70 oil."
|July, 16, 11:05:00|
|July, 16, 11:00:00|
|July, 16, 10:55:00|
|July, 16, 10:50:00|
|July, 16, 10:45:00|
|July, 16, 10:40:00|
AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.