The oil bankruptcies are just beginning. Here's who could be next
New York (CNN Business)The oil crash is blocking American frackers from accessing the cheap credit that fueled their prolific rise. That reversal of fortunes could prove fatal for overleveraged shale oil companies.
The downturn in the oil industry has laid bare just how much America's rise to superpower status in the energy world was made possible by easy money. Virtually unlimited borrowing allowed shale companies to dramatically ramp up production, whether that oil was needed or not.
Getting locked out of the junk bond market will tip the weakest players into bankruptcy, risking countless US jobs along the way. That's what happened during the last oil crash that began in 2015.
The looming oil patch bankruptcies underscore the fragile state of the boom-to-bust industry even before the coronavirus crisis.
"These companies were in trouble before COVID-19 happened," John Kempf, senior director at Fitch Ratings, told CNN Business. "After 2015 and 2016, they never really got their balance sheets back together. When stress came, they weren't prepared for it."
Despite a recent rebound, US oil prices have imploded by three-quarters since early January, to just $15 a barrel. The crash was driven by excess supply, especially from Russia and Saudi Arabia, and an unprecedented collapse in demand because of the coronavirus pandemic.
There's so much crude that the world is running out of space to store it all. That conundrum caused crude to tumble well below zero last week, marking the first instance of negative oil prices since futures launched in 1983.
https://www.cnn.com/2020/04/30/business/oil-bankruptcies-default/index.html
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How great to see you! I've been somewhere in the ether, how are you?
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