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Where Will We Find The Next Energy Bankruptcies?

The following is covered in more detail within the April 2015 issue of Sector IQ: Energy.

Energy risk levels continue to evolve in the current low-price oil environment. Our credit risk league tables highlight where the risks lie and quantify their changes over time. This quarter, we also looked at which companies have filed for bankruptcy and which ones previously appeared in our published league tables.

Despite a drop in risk levels during the first quarter of 2015, more bankruptcies have occurred this year than in all of 2014.

S&P Capital IQ Energy Sector Bankruptcies League Table

Reviewing bankruptcies of companies in the GICS energy sector with more than $100 million in assets at filing, we found three U.S. energy companies that filed for bankruptcy in 2014: 

  1. James River Coal Co.
  2. Matagorda Island Gas Operations LLC
  3. Marion Energy Inc.

In contrast, four U.S. energy companies which met those criteria have already filed in the first quarter of 2015: 

  1. Quicksilver Resources Inc.
  2. Cal Dive International Inc.
  3. BPZ Resources Inc.
  4. Dune Energy Inc.

Interestingly, the credit risk league tables of prior issues of Sector IQ: Energy already highlighted two of the four Q1 2015 bankruptcies as risky companies.

  • Quicksilver Resource Inc., the largest U.S. energy company filing for bankruptcy in 2014 and 2015, appeared in our second edition (October 2014) with the second highest upstream probability of default (PD) as of September 15, 2014, at 37.92% (more than a one-in-three chance of default with a one-year horizon).
  • Cal Dive International Inc., which placed seventh as of December 31, 2014, filed for bankruptcy less than three months later on March 9, 2015.

While the PD model can’t divine the future, the average upstream risk level of 30% in our April 2015 credit risk league table strongly indicates that we may see bankruptcies from our current league table, as well.

View the entire Sector IQ: Energy report here. 

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