Moody's: Energy Sector Weakness Surges, Liquidity Stress Hits Record Level

The hits just keep coming for the beleaguered oil and gas industry.

In February, Moody’s Investors Service downgraded 19 energy companies. The credit ratings group followed up with the downgrading of six offshore drillers March 1, asserting that ongoing frailty in commodities prices was fundamentally changing the energy space. Moody’s said in a March 2 research document that its liquidity stress index (LSI) for the oil and gas industry has grown to a record 27.2 percent.

All of which made February the biggest month ever for liquidity downgrades. Exploration and production (E&P) companies accounted for 17 of 25 companies downgraded. Among those, 10 E&Ps and one oilfield services company were cut to the SGL-4, Moody’s lowest liquidity rating.

February’s LSI tops the previous high of 24.5 percent, which occurred during the last recession.

“The prolonged weakness in energy sector credit conditions is driving the sustained increase in the LSI,” said John Puchalla, a Moody’s senior vice president, in a statement. “Energy liquidity downgrades came as part of our ongoing review of oil & gas companies globally in light of the weaker price environment.”

The index has been on the rise since November 2014 when commodity prices began a freefall. Continued oversupply coupled with weaker-than-expected demand has continued to push prices down. And despite Russian and Saudi Arabian talk of a production freeze, nothing has materialized from those discussions to boost prices to meaningful levels. What’s more, sources and delegates at the Organization of Petroleum Exporting Countries (OPEC) say that production cuts are unlikely and will occur during the June OPEC meeting, regardless of oil prices.

An award-winning journalist, Deon has reported on energy, business and politics for almost 20 years. Email Deon at deon.daugherty@rigzone.com

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Related Companies
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE

More from this Author
Deon Daugherty
Senior Editor | Rigzone
 -  Western Oil Industry Reaction Mixed On... (Sep 29)
 -  OPEC Agrees to Crude Production Cut (Sep 28)
 -  BLOG: Clinton, Trump Offer Little Insi... (Sep 27)
 -  OPEC Production Deal May Be On Hold (Sep 26)
 -  Pioneer CEO Scott Sheffield: Lessons L... (Sep 23)


Most Popular Articles

Brent Crude Oil : $48.69/BBL 5.91%
Light Crude Oil : $47.05/BBL 5.32%
Natural Gas : $2.952/MMBtu 1.60%
Updated in last 24 hours