Biggest Wave Yet of U.S. Oil Defaults Looms as Bust Intensifies
In less than a month, the U.S. oil bust could claim two of its biggest victims yet.
Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn’t pay interest on their bonds last week. They have until the middle of next month to either pay the interest, work out a deal with their creditors or face a default that could tip them into bankruptcy.
If the two companies fail in March, it would be the biggest cluster of oil and gas defaults in a month since energy prices plunged in early 2015.
“We’re just beginning to see how bad 2016 is going to be,” said Becky Roof, managing director for turnaround and restructuring with consulting firm AlixPartners.
Debt-Fueled Boom
The U.S. shale boom was fueled by junk debt. Companies spent more on drilling than they earned selling oil and gas, plugging the difference with other peoples’ money. Drillers piled up a staggering $237 billion of borrowings at the end of September, according to data compiled on the 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. U.S. crude production soared to its highest in more than three decades.
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http://www.bloomberg.com/news/articles/2016-02-25/biggest-wave-yet-of-u-s-oil-defaults-looms-as-bust-intensifies
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