There has been an unprecedented spike in the number of bankruptcies of oil and gas companies in the United States in the third quarter of 2015. A nosedive in oil prices is the reason. The companies extracting oil from shale deposits in the U.S. bear enormous costs compared with other oil-producing countries.
Nine oil and gas companies with debt more than $2 billion filed for bankruptcy in the fourth quarter of 2015. Experts say more bankruptcy cases may follow next year. Oil and gas companies have to cut spending on exploration and capital investment. Most companies’ profits declined 51% from the fourth quarter a year ago.
There are 18 more US oil and gas companies that are on the verge of declaring bankruptcy. They are preparing documents for bankruptcy filing. In the near future the number is going to increase.
Companies’ profits declined along with a fall in oil prices. However, the lost access to credit markets was the last straw. It became much more difficult to get loans and without them the exploration companies are forced to go bankrupt.
The U.S. energy industry witnessed a snowball effect with falling shares of oil and gas companies resulting in rapid depreciation of bonds. Most analysts are unanimous that this is only the beginning of the collapse and that further increase of the cost of loans and the whole negative situation can trigger more bankruptcies.
Thus, there is a 95% probability of Chesapeake Energy, the biggest U.S. oil and gas firm, ultimately being forced into bankruptcy.
Spending of many U.S. mutual funds specializing in the energy sector also increased significantly to 15.4% over the past three months, having the overall negative impact on the economy.
