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Economy

Credit Problems Mount for US Energy Sector: September 2020

Source: https://www.creditbenchmark.com/september-2020-oil-and-gas-aggregate/

The besieged US energy sector continues to see credit deterioration, and with a multitude of problems facing the industry there is little cause for optimism. In the US, energy companies were supplying fewer barrels of gas per day even with the recovery in consumption, and shale producers are facing a cash crunch. Meanwhile, European oil producers are questioning whether it’s worth drilling. Problems that began months ago continue to fester for firms around the world. Demand will likely remain depressed until the economy picks up, and credit will continue to be stressed.

Probability of Default for US Oil & Gas Firms Surges by 50% Over Last Year

  • Credit quality for US-based oil and gas firms continues to trend lower and probability of default has surged
  • Percentage of firms with a low CBC rating is much higher for US than for UK, EU energy aggregates

US Oil & Gas

The credit deterioration in US energy continues, but at a slower pace than in recent months. With the latest update, large US oil & gas firms have seen credit quality drop just 3% from the prior month. That compares to a drop of 10% from two months prior, 17.4% from three months prior, or 41.5% from six months prior. Credit quality has dipped about 50% from the same point last year. Default risk is surging. Average probability of default is now 58.7 basis points. That compares to 57 bps the prior month, 53.4 bps two months prior, 50 bps three months prior, and 41.5 bps six months prior. At the same point last year, average probability of default was 39.1 bps. This aggregate’s CBC rating is bb+.

UK Oil & Gas

Credit is also deteriorating in the UK energy sector. For large UK oil & gas firms, credit quality is down 2% from the prior month, 4% from two months prior, 7% from three months prior, and 15.4% from six months prior. Compared to the same point last year, it’s down 17.3%. Default risk is climbing as credit quality drops. Average probability of default is now 38.5 bps. That compares to 37.9 bps the prior month, 37 bps two months prior, 35.9 bps three months prior, and 33.4 bps six months prior. At the same point last year, average probability of default was 32.8 bps. This aggregate’s CBC rating is bbb-.

EU Oil & Gas

Credit quality is also trending down for large EU oil & gas firms. It’s declined by 1% from one month prior, 3% from two months prior, 7% from three months prior, and 10.6% from six months prior. Year-over-year, it’s down by 8%, indicating some volatility and that the decline in quality is a more recent trend. Default risk is growing. Average probability of default is now 27.3 bps. That compares to 27.1 bps the prior month, 26.4 bps two months prior, 25.5 bps three months prior, and 24.7 bps six months prior. At the same point last year, average probability of default was 25.4 bps. This aggregate’s CBC rating is bbb.

To learn more about the data behind this article and what Credit Benchmark has to offer, visit https://www.creditbenchmark.com/.

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ForwardKeys is one of the leading travel analytics firms that provides investment firms with alternative and predictive data on the travel industry. Data is offered both on the demand and the offer-side of the aviation market.

Actual Air Reservations is an aggregation of flight bookings made via the Global Distribution Systems. Exclusive agreements make that global travel data is available, including regions that are generally difficult to track. This data contains valuable insights into the profile, behaviour, and impact of events on past, present and future air travellers.

Seat Capacity provides insights into the scheduled flights from 99% of global commercial airlines.

Financial institutions use this data for artificial intelligence and predictive models to forecast the performances of businesses. Combined, the datasets can provide insights into the financial health of businesses operating in the travel and tourism industry. This list contains companies like airlines, airplane leasing companies, oil companies, hotels and travel agencies.