Ryan Pollin for Zondits, February 24, 2016. Image credit: jp26jp
That is the bombshell conclusion of auditing firm Deloitte’s recent report. After examining 500 publicly traded oil companies, Deloitte declared about 175 of them to be at high risk of bankruptcy due to large amounts of debt – collectively they are more than $150 billion dollars in the red. Part of the trouble is the low price of oil, which was at $50 per barrel in the start of November before steadily crawling down to $30, where it hovers this month. Managing this much debt while selling their commodity at such a low price puts oil producers in a tight squeeze.
High risk of bankruptcy for one-third of oil firms: Deloitte
Reuters, February 16, 2016
Roughly a third of oil producers are at high risk of slipping into bankruptcy this year as low commodity prices crimp their access to cash and ability to cut debt, according to a study by Deloitte, the auditing and consulting firm.
The report, based on a review of more than 500 publicly traded oil and natural gas exploration and production companies across the globe, highlights the deep unease permeating the energy sector as crude prices sit near their lowest levels in more than a decade, eroding margins, forcing budget cuts and thousands of layoffs.
The roughly 175 companies at risk of bankruptcy have more than $150 billion in debt, with the slipping value of secondary stock offerings and asset sales further hindering their ability to generate cash, Deloitte said in the report, released Tuesday.