Sat, Mar. 28, 8:25 AM
- The number of companies with the worst below-investment grade debt ratings has jumped to a two-year high of 184 firms, with the oil price rout pushing a record 25 U.S. energy producers onto this month's list at Moody’s.
- The oil-and-gas and oil services companies listed account for a record 13.6% of the total of stressed companies rated B3 - six notches into junk territory - with a negative outlook for future ratings changes or lower; historically, oil firms have averaged ~8% of the firms on the list.
- During Q1, a dozen oil companies including Energy XXI (NASDAQ:EXXI), Midstates Petroleum (NYSE:MPO) and Halcon Resources (NYSE:HK), were added.
- If oil firms’ liquidity issues do not get fixed and they keep getting downgraded, the industry likely will see more debt defaults, Moody’s analyst Julia Chursin says.
- The total of 184 financially stressed companies is up 16% Y/Y but still far short of the 290 borrowers at the peak of the financial crisis in Q1 2009.
Wed, Mar. 18, 11:49 AM
- "$60 is the new $90" when it comes to oil prices, Global Hunter says as it turns more bearish on the prospects for "the fringier or Tier 2 E&Ps" and adding that some "simply can't compete."
- The firm slaps Sell ratings on Halcon Resources (NYSE:HK), saying "NAV upside appears limited given relatively light tier 1/economic inventory and huge share count," SandRidge Energy (NYSE:SD), citing "falling oil production and hedges rolling off leads to lower cash flows, reducing ability to grow," as well as Goodrich Petroleum (NYSE:GDP), Triangle Petroleum (NYSEMKT:TPLM) and Bill Barrett (NYSE:BBG).
Thu, Feb. 26, 6:19 PM
- Halcon Resources (NYSE:HK) is reiterated with a Buy rating and a $3 price target, raised from $2.50, at MLV, which cites surprises in its Q4 results including a strong reserve report and reaffirmation of its borrowing base.
- Investors had been focusing on HK's balance sheet and liquidity, so the recent reaffirmation of its borrowing base at $1.05B is a significant event, MLV says after it had expected a nearly 15% reduction to ~$900M.
- The firm says HK’s liquidity position is protected by one of the strongest hedge books in the sector, including 90% of 2015 estimated oil volumes hedged at a weighted average floor price of ~$87/bbl which should translate into realized gains of $350M-plus this year, or about one-third of revenue.
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Fri, Feb. 13, 5:36 PM
Fri, Feb. 13, 9:15 AM| 3 Comments
Wed, Jan. 21, 2:03 PM
- “Companies will start to sell off the family silver” amid sustained low oil prices, and Halcon Resources (NYSE:HK) and Goodrich Petroleum (NYSE:GDP) are among energy companies that need to keep an eye on their liquidity the most and are thus the most likely candidates to sell assets, analysts say.
- HK has the most debt relative to its market value among similar-sized North American peers, according to Bloomberg data, and its plan to cut 2015 drilling to just three rigs vs. earlier plans for as many as 11 opens up the possibility that it could try to sell some of the acreage where it is not currently drilling, SunTrust's Neal Dingmann says.
- Analysts also tab Clayton Williams Energy (NYSE:CWEI), Denbury Resources (NYSE:DNR) and Penn West Petroleum (NYSE:PWE) as energy companies most likely to sell assets.
- Also, Dingmann names top Bakken producers Continental Resources (NYSE:CLR) and Whiting Petroleum (NYSE:WLL) as potential targets of takeover interest as producers with stronger balance sheets that have become more affordable with oil’s plunge; other analysts mention Carrizo Oil & Gas (NASDAQ:CRZO) and PDC Energy (NASDAQ:PDCE) as potential candidates.
Wed, Jan. 14, 2:35 PM
- Barclays downgrades the large-cap E&P sector to Negative from Neutral and the small- and mid-cap E&P group to Negative from Positive, arguing that downside risk outweigh potential gains even if oil prices recover.
- Equity investors are pricing in WTI crude assumptions of close to $75/bbl in 2016 compared to current strip prices of ~$57, Barclays says, also noting that an abundance of relatively cheap oil supply from U.S. producers could further delay a price recovery.
- Among specific names, the firm downgrades CHK, SD, REN and HK to Underweight; DVN, CLR, KOS, MRO, RSPP and WLL are cut to equal weight.
- At the same time, Barclays picked a few favorites, upgrading Range Resources (NYSE:RRC) to Overweight from Equal Weight, and maintained Overweight ratings on large-cap E&P companies CNQ, EOG and NBL; among small- and mid-cap E&P names, the firm favors AR, CXO and XEC.
- ETFs: XOP, IEO, PXE
Thu, Jan. 8, 5:38 PM
- Halcon Resources (NYSE:HK) says it will slash its 2015 drilling and completion budget by roughly half, expecting to spend $375M-$425M rather than its earlier forecast of $750M-$800M.
- HK says it plans to operate an average of two rigs in the Fort Berthold area of the Williston Basin and one rig in El Halcón in east Texas during 2015, compared with the six rigs planned earlier.
- HKJ expects to produce 40K-45K boe/day in 2015.
- Also says it is 88% hedged on its estimated oil volumes at a weighted average price of $87.29/nbl and 86% hedged on estimated natural gas volumes at a weighted average price of $4/MMBtu.
Wed, Jan. 7, 7:05 PM
- U.S. oil producers will keep pumping, even at sub-$50 crude oil, because they have to pay off debt, but they are having trouble keeping up with debt payments in the wake of raising their borrowing 55% since 2010 to nearly $200B, WSJ reports.
- Energy analysts warn defaults could be coming: “The group is not positioned for this downturn... There are too many ugly balance sheets,” says Baird's Daniel Katzenberg.
- Lenders are already doling out tough love to companies, MLV amalyst Chad Mabry says, with some lenders wanting to see producer plans for handling further price drops while others are urging asset sales.
- The 10 highest ratios of net debt/EBITDA from the last 12 months, according to S&P Capital IQ, belong to KWK, AR, WRES, GDP, REN, HK, XCO, REXX, MPO, EPE.
Dec. 26, 2014, 4:23 PM
- Though most large-cap energy stocks closed the day with modest gains or losses, a slew of small-cap and mid-cap U.S. oil and gas plays sold off on a day that saw WTI crude once more fall below $55/barrel, and Henry Hub natural gas drop below $3/mmBtu for the first time since 2012, before bouncing a little.
- Decliners: EXXI -4.4%. SGY -4.5%. HK -4.1%. EVEP -2.3%. NFX -3.2%. SDR -3.3%. SN -5.2%. SD -5.9%. LGCY -2.2%. CHKR -3.3%.
Dec. 20, 2014, 1:34 PM
- These five oil and gas producers have among the highest net debt-to-capital ratios in the industry, writes Avi Salzman, which could be an issue if oil prices stay at these levels:
- Ultra Petroleum (NYSE:UPL) at 115%, EXCO Resources (NYSE:XCO) at 90.3%, Halcon Resources (NYSE:HK) at 68.7%, W&T Offshore (NYSE:WTI) at 68.1%, Energy XXI (NASDAQ:EXXI) at 65.2%.
- Previously: Barron's: Five oils to buy now (Dec. 20, 2014)
Dec. 8, 2014, 7:20 PM
- With valuations at a decade low, oil execs such as Chesapeake Energy’s (NYSE:CHK) Archie Dunham and Ring Energy's (NYSEMKT:REI) Tim Rochford are driving the sector's biggest wave of insider buying since 2012, according to Bloomberg data.
- Rochford and two other board members bought a total of more than 30K REI shares over the past month; the CEO says the company can stay profitable even should oil slip to $50/bbl.
- “Most of these execs that are buying have been in the industry as long as I have, so they know how supply and demand works and they’re buying quality stocks,” says Dunham, who recently bought 500K CHK shares in his biggest purchase since joining the company’s board in 2012.
- Loews Corp. (NYSE:L), which owns about half of Diamond Offshore (NYSE:DO), bought 1.18M DO shares in November and bought another ~410K shares last week.
- Halcon Resources (NYSE:HK) and Goodrich Petroleum (NYSE:GDP) are among companies operating in the costliest U.S. shale-producing regions, but execs from those companies are buyers as well.
Dec. 2, 2014, 5:44 PM
- Oil producers with the most debt are the most at risk in a ~$70/bbl oil price environment, since they have more relative cash flow directed toward interest payments rather than drilling, so they’re most likely to see production declines.
- For investors looking to limit risk, MarketWatch's Philip Van Doorn provides a list of U.S. shale oil producers with market values of at least $50M and share prices above $1 with the highest ratios of debt to equity, in order: UPL, MPO, MRD, ISRL, JONE, XCO, PQ, GDP, LINE, HK.
Dec. 1, 2014, 3:32 PM
- Prices of bonds issued by low-rated energy companies are falling sharply despite today's rebound in oil prices, amid worries that this year’s slump in oil markets will lead to a cash crunch.
- The most actively traded junk bonds at midday were Linn Energy’s (LINE -5.8%) two B-rated notes due 2019, which fell 9% to $0.82 on the dollar, pushing yields up to ~11.5%; Halcon Resources' (HK -1.3%) 2021 bond, which started weakening Friday, has dropped 10% today to $0.69 on the dollar, pushing up the yield to 17%.
- Energy XXI’s (EXXI -15.8%) debt which matures in 2017 fell 5.5% to $0.85 on the dollar and yielding 15.5%; Quicksilver Resources' (KWK +38.3%) bonds due 2016 have rebounded slightly but still trade ~$0.22 on the dollar.
- Should oil prices fall below $65/bbl and stay there for the next three years, J.P. Morgan high-yield energy analyst Tarek Hamid estimates that up to 40% of all energy junk bonds could default over the next several years.
HK vs. ETF Alternatives
Halcon Resources Corp is an oil and natural gas company, which is engaged in the acquisition, production, exploration and development of onshoreliquids-rich oil and natural gas assets in the United States.
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