Creditsafe USA has recently released troubling statistics about the volatile oil and gas sectors. Featured in the Creditsafe Oil and Gas Sector Report, this analysis examines the key financial metrics of an industry where six major companies have declared massive financial problems in less than two weeks. With five companies filing for Chapter 11 protection—Breitburn Energy Partners, Intervention Energy, LLC., Linn Energy, Pennsylvania Virginia Corp., and Sand Ridge Energy and Seventy Seven Energy, Inc. declaring financial restructuring, the future of this significant US industrial market is unclear.
“Our study examines the fundamentals of the sector’s two primary areas—extraction and support activities. Each of these areas has experienced significant financial turmoil over the past several months with no sign of improvement. Many companies have seen a massive decline in their credit rating as a result of paying bills later while racking up enormous amounts of debt. The oil and gas industries have a rough road ahead of them with no clear path for stability,” said Matthew Debbage, president of Creditsafe’s American and Asia-Pacific Opera-tions.
Creditsafe’s Oil and Gas Sector Analysis focuses on companies with a NAICS of 211111 (Crude Petroleum and Natural Gas Extraction) and 213112 (Support Activities for Oil and Gas Operations). Over the past three months, there have been several significant developments:
Trade Credit Ratings:
- 48% of companies in the Oil & Gas sector have seen a significant decrease in their credit rating
- Companies with a decreased credit rating experienced an average rating de-cline of 15 points — from 52.62 to 36.82
- Companies in the oil and gas industries are paying their bills 25% later in May 2016 than in February 2016. The total number of payment days beyond terms has increased from 5.8 days to 7.3 days
- Over 20% of companies in the oil & gas sector have seen a significant nega-tive change in payment days beyond terms
- For companies with negative payment behavior, the average number of days beyond terms has increased from 5.1 days to 36.2 days
Oil and Gas Industry Snapshot:
- Oil and gas industry consists of approximately 22,000 companies with over 4.75 million employees
- Sixty oil and gas companies have filed for bankruptcy since 2014
- Bankruptcies in this sector are expected to sextuple in 2016 according to Deloitte
- Eleven oil and gas companies filed for bankruptcy in April 2016 with an accu-mulated debt of $14.9 billion
Source: Creditsafe News