NEW YORK, Sept. 13 (UPI) -- The number of struggling companies tied to the exploration and production side of the energy sector has nearly doubled, Moody's Investors Service found.
"The jump in oil and gas defaults that was driven by slumping commodity prices was primarily responsible for the increase in the overall U.S. default rate in 2015 and continues to fuel it in 2016," David Keisman, a senior vice president at Moody's, said in a statement.
Analysis early this year from consultant group Wood Mackenzie said energy companies are reassessing their spending plans, sidelining high-risk fields that may have been economical under better market conditions two years ago. That means less capital for companies that otherwise would have benefited from those developments.
From the perspective of Moody's, the pressure on the energy sector from the collapse in crude oil prices, down about 50 percent from peaks two years ago, was heavier than initially thought.
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Last year, Moody's said there were 17 oil and gas companies that went bust and 15 of those were working in the exploration and production side of the industry. Bankruptcies for exploration and production companies accelerated this year, with the number so far nearly twice the figure for 2015.
In August, rig company Diamond Offshore said that, for offshore drillers, the future was less certain as recovery may not be as robust as industry peers had expected. Rival Hercules Offshore in June said it was returning to Chapter 11 bankruptcy with a plan to sell off all of its assets.
"When all the data is in, including 2016 bankruptcies, it may very well turn out that this oil & gas industry crisis has created a segment-wide bust of historic proportions," Keisman said.
