Oil Industry Needs to Find Half a Trillion Dollars to Survive

(Bloomberg) -- At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 2.3 percent at $39.47 a barrel at 1:43 p.m. in Singapore.

“The look and shape of the oil industry would likely change over the next five to 10 years as companies emerge from this,” Wood said. “If oil prices stay at these levels, the number of bankruptcies and distress deals will undoubtedly increase.”

Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. A total of about $550 billion in bonds and loans are due for repayment over the next five years.

U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.

In the U.S., the number of bonds yielding greater than 10 percent has increased more than fourfold to 80 over the past year, according to data compiled by Bloomberg. Twenty-six European oil companies have bonds in that category, including Gulf Keystone Petroleum Ltd. and Enquest Plc.


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josh sch  |  August 31, 2015
REALLY DUDE? GET OFF THE INTERNET ITS POWERED BY OIL. sound like your a bad business man because you should have compensated for higher prices....
$50-oil  |  August 27, 2015
Oil industry took ALL our savings over the past 6+ years, so where did they squander it all? Oil should be FROZE at $50.00. Make them accountable to there income instead of PILFERING our savings. So many people went bankrupt because of the EXTRAORDINARY HIGH OIL PRICE. I know, I was one. I had to get to work just to feed my family meager rations. Then our child got hurt and the medical bills killed us. THANKS TO YOU, OIL INDUSTRY, FOR ALL THE HURT YOUVE DONE!