ConocoPhillips and Anadarko Petroleum Corp. are among 29 U.S. oil and gas exploration and production companies whose ratings Moody’s Investors Service is reviewing for possible downgrades, spelling new trouble for the beleaguered industry.
This comes as plummeting commodity prices have weighed on energy producers’ debt, with the industry’s investment-grade bonds falling 4.7 percent this year. Junk-rated energy securities have fared much worse, losing 21 percent, according to Bank of America Merrill Lynch indexes. Yields on speculative energy debt have risen to 14.91 percent, the highest since 2009.
ConocoPhillips is rated A2 by Moody’s, while Anadarko, at Baa2, is just two steps above junk.
Oil prices have tumbled 33 percent this year, trading Wednesday near a six-year-low at $35.79 a barrel. The Bloomberg Intelligence Independent Explorers and Producers Index of 61 equities has fallen 51 percent.
Among the companies up for review are some of the best performers in the shale patch, a sign that the impact of lower oil prices is spreading. Shares of Newfield Exploration Co. have advanced 27 percent this year while Cimarex Energy Corp. and Pioneer Natural Resources Inc. are down less than 10 percent.
"Industry conditions have weakened further, with oil and natural gas prices at multiyear lows," said Pete Speer, Moody’s senior vice president. "E&P companies will be stressed for a longer period with much lower cash flows, difficulty selling assets and limited capital-markets access."
A Moody’s gauge of stress in the high yield oil and gas sector has risen to the highest since 2009. Energy defaults may rise as high as 5 percent next year, according to the ratings company.
So far this year, at least 36 producers owing more than $13 billion have gone bankrupt, according to a Nov. 8 report from Haynes & Boone, a law firm with offices in Houston, New York and other cities. Magnum Hunter Resources Corp., filed for bankruptcy yesterday.