January 18, 2016 – Kallanish Energy
Numerous O&G companies shuffling toward death
Oil and gas producers have cut personnel, slashed capital budgets, laid down rigs, and begun to ration paper clips (well, not yet, but it could happen).
But commodity prices continue to fall and demand is only inching up, leaving numerous companies – over and above the 42 firms that sought bankruptcy court protection during 2015 (according to law firm Haynes & Boone) – that continue shuffling toward death.
Read the full article here: http://www.kallanishenergy.com/2016/01/18/numerous-og-companies-shuffling-toward-death/
The ‘walking dead’
Nick Cacchione, founder of Oil & Gas Financial Analytics, has been tracking the financial woes of dozens of independent oil and gas producers for more than a year. Last week, he published his latest blog, on “the walking dead,” on the website of analytics/consulting firm RBN Energy.
Based on analysis of the financials of more than 50 U.S. independent E&Ps, Cacchione hones in on companies with an interest coverage ratio (earnings before interest, taxes, depreciation and amortization, or EBITDA, divided by interest) below three times.
He also looked for companies with a debt to capital ratio above 75%, with all numbers based on third-quarter 2015 financials.
“Having these metrics makes it difficult or impossible for companies to access traditional capital markets to remedy their financial issues,” Cacchione wrote. “They’ve maxed out all their credit cards.”
“Next, we took a look at the ability of companies that matched our criteria to sustain current cash flow,” Cacchione said. “Just as retail stores eventually go out of business if they can’t restock their shelves, oil and gas companies slowly die from falling production if they can’t replace what they’ve sold.”
