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Energy’s Distress May Ease Because So Many Already Went Bust

  • Coronavirus outbreak, low prices weeded out the weakest firms
  • Distressed energy debt total plunged 75% since pandemic peak

Better days may be ahead for energy companies after a busy year of bankruptcies, with the coronavirus pandemic culling the weakest borrowers and investors pricing in a sharp economic recovery when vaccines become widely available.

About $144 billion of energy bonds were trading at distressed levels in the middle of March, when the pandemic sent oil demand plunging, but that number receded to $37 billion by the end of November. That’s because some oil and gas companies have filed for bankruptcy while others have seen their fortunes rebound, according to Bloomberg Intelligence.