Recent actions of two exploration and production companies have pushed the trailing 12-month energy default rate among issuers of high-yield bonds tracked by Fitch Ratings to 2.6%, well above the long-term average of 1.9%.
With the Chapter 11 filing by Sabine Oil & Gas Corp. on July 15 and default via a distressed debt exchange by Lightstream Resources Ltd. on July 2, the rate for the E&P subsector increased to 5.1% from 3.7%, according to Fitch.
“Significant decreases in oil and gas market prices have impaired many E&P companies’ ability to pay interest and principal and led to some defaults,” Fitch noted.
Sabine and Lightstream had borrowed heavily to fund drilling programs.
“Other significant E&P defaults this year include Midstate Petroleum Co., Connacher Oil & Gas Ltd., and Quicksilver Resources Inc.,” Fitch said.