Oil producers seem to face black-swan events that can destroy demand or greatly increase supply at any time. So far this year the pain is only getting worse.
Below is a list of U.S. oil producers and oilfield servicers with the highest leverage that are low on cash. Some of them may not survive 2020.
U.S. oil producers are reeling from a vast reduction in demand from the coronavirus shutdown, but also from the decision by Saudi Arabia and Russia to increase output.
Early on Monday, the price of West Texas Intermediate crude oil for May delivery CLK20, -33.49% sank as much as 40% to $11.04 a barrel. Meanwhile, WTI for September delivery CLU20, -2.33% traded at $30.53. Investors obviously expect oil demand to bounce back over the next five months.
That puts even more pressure on prices, as producers scramble to store as much oil as possible to sell later. Myra Saefong provided a full explanation of this “super contango.”
Mitch Rubin, a managing director at RiverPark Advisors in New York, said during an interview on April 17 that he had “shorted” — or betted against — energy companies for a year and a half heading into the coronavirus crisis, because “when you own something and do not control the price of the product, you do not control your destiny.” (He has since covered those short positions.)
At a time of plunging cash flow, highly indebted oil companies will do everything they can to shore up liquidity, lower production and cut any costs they can.
The S&P 500 energy sector has already dropped 43% this year through April 17. That is, by far, the worst performance among the S&P sectors, with the full S&P 500 Index SPX, -1.26% declining 11%.
Despite that tremendous decline, nobody can say for sure when oil demand will recover sufficiently to take highly leveraged U.S. producers out of the danger zone.
To take a broad look at the energy sector, the following list is derived from the S&P 1500 Composite Index, which includes the S&P 500, the S&P 400 Mid Cap Index MID, -1.38% and the S&P Small Cap 600 Index SML, -1.49%. The S&P 1500 energy sector includes 82 companies. Here are the 30 with the highest ratios of net debt (total debt minus cash) to total capital:
|Company||Ticker||Net debt/ equity||Total return – 2020 through April 17||Industry|
|Tetra Technologies Inc.||TTI, -0.40%||94.5%||-87%||Oilfield Services/Equipment|
|Equitrans Midstream Corp.||ETRN, -0.20%||89.2%||-42%||Oil & Gas Pipelines|
|Apache Corp.||APA, -4.24%||71.3%||-67%||Oil & Gas Production|
|Oneok Inc.||OKE, -3.66%||67.1%||-61%||Oil & Gas Pipelines|
|Par Pacific Holdings Inc.||PARR, -6.71%||66.9%||-69%||Oil Refining/Marketing|
|Core Laboratories NV||CLB, -0.85%||66.2%||-69%||Oilfield Services/Equipment|
|Archrock Inc.||AROC, -2.87%||63.0%||-61%||Oilfield Services/Equipment|
|Williams Companies Inc.||WMB, -1.93%||61.9%||-21%||Oil & Gas Pipelines|
|Denbury Resources Inc.||DNR, -0.99%||61.1%||-87%||Oil & Gas Production|
|Gulfport Energy Corp.||GPOR, +0.35%||60.6%||-76%||Oil & Gas Production|
|Range Resources Corp.||RRC, +1.82%||58.0%||-4%||Oil & Gas Production|
|Cnsol Energy Inc.||CEIX, -4.01%||57.9%||-64%||Coal|
|U.S. Silica Holdings Inc.||SLCA, -7.61%||57.8%||-75%||Other Metals/Minerals|
|Laredo Petroleum Inc.||LPI, -0.19%||56.8%||-85%||Oil & Gas Production|
|Nabors Industries Ltd.||NBR, +0.44%||54.6%||-90%||Contract Drilling|
|Exterran Corp.||EXTN, -3.17%||52.1%||-40%||Oilfield Services/Equipment|
|Penn Virginia Corp.||PVAC, -10.12%||51.0%||-87%||Oil & Gas Production|
|SM Energy Co.||SM, -7.56%||50.2%||-85%||Oil & Gas Production|
|Callon Petroleum Co.||CPE, -5.68%||50.1%||-91%||Oil & Gas Production|
|Noble Corp. PLC||NE, -3.14%||50.0%||-83%||Contract Drilling|
|Occidental Petroleum Corp.||OXY, -8.62%||49.2%||-65%||Oil & Gas Production|
|Kinder Morgan Inc. Class P||KMI, -1.97%||49.1%||-28%||Oil & Gas Pipelines|
|Antero Midstream Corp.||AM, +4.54%||47.9%||-51%||Oil & Gas Pipelines|
|Halliburton Co.||HAL, -1.97%||47.3%||-69%||Oilfield Services/Equipment|
|Matador Resources Co.||MTDR, -7.60%||45.9%||-81%||Oil & Gas Production|
|Marathon Petroleum Corp.||MPC, -1.72%||45.8%||-57%||Oil Refining/Marketing|
|Noble Energy Inc.||NBL, -1.58%||45.0%||-72%||Oil & Gas Production|
|Oasis Petroleum Inc.||OAS, -5.75%||42.7%||-92%||Oil & Gas Production|
|Southwestern Energy Co.||SWN, -0.37%||42.4%||10%||Oil & Gas Production|
|CNX Resources Corp.||CNX, +0.47%||41.2%||20%||Integrated Oil|
You can click on the tickers for more about each company.
You will need to scroll the table to see all of the data.
All of the net debt/capital ratios are as of Dec. 31. Companies that have taken significant measures to increase liquidity will have made announcements in the meantime, so it’s important to do your own research if you are interested in any of the companies mentioned here. The situation for many will no doubt be quite different when the March 31 figures are reported.