The Energy Sector Has Recovered, But Material Issues Still Exist

Having established that the recovery rates for bankrupt energy debt are at ‘catastrophic‘ levels, I think it’s important to review the biggest risk to the market today: the energy sector.

With WTI at 45bpd, all is well in frackville, apparently. However, should the recent swoon be a foreshadowing of things to come, ahead of the 2017 debt wall, you will rue the day that you held onto those idiot oil stocks–awaiting House of Saud manipulation.

Currently, approximately $130b in energy credit is ‘distressed’. That number was almost treble the amount in February of 2016. Things have materially improved since then.

Some of the  recent losses in many of the ‘less than pristine’ names have been alarming to say the least.

(ticker, 1 mo return/debt-eq ratio, debt)

PACD -28%, 23x, $3b

GLF -26%, 5.6x, $486m

WTI -25%, 8.9x, $1.5b

SDRL -21%, 7x, $11.2b

CRC -16%, 12x, $6b

And here are some of names with better cover ratios, now under pressure. The debt of this tranche of ‘almost distressed’ amounts of $440b.

SID -28%, 2.6x, $9.7b

XCO -23%, 3.9x, $1.37b

ATW -22%, 2x, $1.6b

CLF -15%, 2.1x, $2.5b

Amongst the premier names, the total debt amounts of about $1.6t. Here are some of the recent underperformers amidst high debt holders.

VALE -12%, 1.4x, $36b

ETP -14%, 1.4x, $28b

FCX -14%, 1.4x, $20b

OKS -10%, 0.6x, $7.6b

CNX -7%, 1x, $3.6b

Should crude take another leg down, watch all of the above names for hurried moves to the downside.