Oil Firms Raise $171 Billion in Debt as Virus Hits Fuel Demand
Oil Firms Raise $171 Billion in Debt as Virus Hits Fuel Demand
(Bloomberg) -- Oil and gas companies worldwide have raised $171 billion of debt from the loan and bond markets since March after the coronavirus pandemic hit demand for fuel.
The $171 billion tally is equivalent to the volume of bonds sold for the industry in the whole year of 2019. The debt pile is set to grow further with almost $120 billion of borrowings due by the end of the year that will need to be either repaid or refinanced. Of that amount, $43 billion is in bonds and $76 billion in loans.
Refinancing the $120 billion of debt due this year could be tricky as analysts predict a dim outlook for the sector even as oil prices bounce back from last month’s lows.
The energy sector remains in a precarious situation as the underlying economy remains weak and people travel far less than they used to, according to a report by financial analytics firm Credit Benchmark.
Default risk for U.S. energy firms is deteriorating fast after credit quality worsened by 10% in last month, the report said. The credit quality score for U.K. oil and gas firms dropped by 1.9% in the month, while European companies suffered a 1.8% decline, according to Credit Benchmark.
Issuers from the Americas have tapped the most funds from the bank market since March with $83 billion, followed closely by firms from Europe, Middle East and Africa region with $77 billion.
Companies such as BP Plc, Exxon Mobil Corp. and Royal Dutch Shell Plc initially obtained funds from the loan market through drawdowns from existing credit lines or new short-term financings. Total loans borrowed reached $67 billion within a three-month period.
The industry giants then began tapping the capital markets to raise funds amid a resurgence in the appetite of bond investors. The $104 billion of debt sold in the bond market from March to May was more than twice the amount for the same period a year earlier.
The table below shows breakdown of debt for the sector since March.
| Debt | Americas | Europe, Middle East, Africa | Asia, Russia |
|---|---|---|---|
| Bonds ($ B) | 56.99 | 35.59 | 11.61 |
| New loans ($ B) | 18.04 | 35.5 | 0 |
| Loan drawdowns ($ B) | 8 | 5.47 | 0 |
| Total ($ B) | 83.03 | 76.56 | 11.61 |
Click here for Americas worksheet with list of drawdowns, new loans and covenant revisions; click here for EMEA, and here for Asia.
©2020 Bloomberg L.P.