Stefano Fugazzi (ABC Ecocnomics) – According to Bloomberg, last week we witnessed the biggest surge in US energy credit risk since December 2014 with the index breaking into the 1,000bps – as shown in the graph below:
Why is the US energy credit risk on the rise? According to Bloomberg, falling oil prices are putting under pressure not only shale oil producers but also the entire energy sector. Four non-shale-oil producers – including Penn Virginia Corp., Paragon Offshore Plc, Magnum Hunter Resources Corp. and Emerald Oil Inc. – last week reported combined debt exposures of approximately $5 billion with auditors expressing doubts “that they can continue as going concerns”.
Analysts from Marathon Asset Management and Barclays are predicting that up to 25% of high yield energy firms may default over the next two-to-three years should oil prices remain below $60 a barrel.