The recent rebound in oil prices did very little to improve the annual growth figures of the US oil and gas industry. Last year, the industry defaulted on nearly US$ 39 Bn in reference to the high-yield energy debt, which was twofold greater than 2015.
In 2014, a huge number of oil and gas companies were able to sustain the pressure and a similar picture surfaced in 2015 as well. However, things did not turn out to be the same in 2016 as a worrying number of the oil and gas exploration companies defaulted on high-yield bonds. Apart from the US, Venezuela’s state-owned PDVSA, having a high-yield debt of almost US$ 13 Bn certainly reveals the capsized condition of the region’s oil and gas sectors.
PDVSA has seen a fall in production and is under the intense scrutiny of the Venezuelan government. It is only a matter of time before a default is recorded against the company as it nears to an inevitable bankruptcy declaration. Few month ago, PDVSA managed to convince creditors for an extension on some of its bonds which bought it some more time to recover.
Few other noticeable bonds that are walking on a thin line include Brazil-based Odebrecht Offshore Drilling having nearly US$ 3 Bn in default, Texas-based FTS International, having almost $800 million in high-yield debt and California Resources Corp., which has over US$ 2.8 billion. On the other hand, industry insiders believe that 2017 will narrate a different story and turn out to be a year of a fresh start for the industry. The price hike in oil will provide a shield for most companies and keep them out of danger.
The rebound of the industry is at its nascent stage, but signs look positive as the sector is going through a repairing phase. In December 2016, a miniscule number of companies declared bankruptcy in the region, which is projected to be the lowest of 2016.
Summary: 2017 will see the revival of the oil and gas industry in America