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Philip van Doorn

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March 12, 2020, 6:56 a.m. EDT

These energy companies have the highest debt and the most at risk as the oil market collapses

Expect bankruptcies among highly leveraged U.S. shale-oil producers

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By Philip van Doorn, MarketWatch


Bloomberg
Pumpjacks operate as a drill rig sits on a well pad in the Bakken Formation in Williston, North Dakota.

Investors shocked at Saudi Arabia’s decision to lower oil prices and increase production sent financial markets reeling. A concern now for the oil and gas industry is which players can survive a prolonged market imbalance.

West Texas crude oil for April delivery /zigman2/quotes/211629951/delayed CL.1 +0.14%  fell as much as 25% to $31.13 a barrel Monday. That action followed Saudi Arabia’s announcement Saturday that after failed negotiations between OPEC and Russia to cut production in an attempt balance supply with reduced demand as the coronavirus spread, it would actually lower its own prices while increasing production .

“Now the question is, what is the Russian response?” said Philip Orlando, chief equity market strategist for Federated Hermes, in an interview. “Do they hold their breath until they turn blue? Or do they say, ‘You have the market weight here, why don’t we sit down to cut and stabilize the market?’ That may be too obvious and rational, so I have no idea how this is going to end up.”

Read: Why an oil price war is wreaking havoc on stocks and global financial markets right now

Highly leveraged energy companies

Banks with heavy exposure to the energy industry may be facing defaults, loan losses and other fallout. Here’s a list of banks with the most exposure as a share of tangible common equity.

But how about the energy borrowers? Starting with the S&P Composite 1500 (made up of the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.04% , the S&P 400 Mid Cap Index /zigman2/quotes/219506813/composite MID -0.67%  and the S&P Small Cap 600 Index /zigman2/quotes/210599868/delayed SML -0.38% ), here are the 20 U.S.-listed oil companies with the highest percentages of long-term debt to equity, according to FactSet, based on their most recent regulatory filings as of March 6:

Company Ticker Long-term debt/ equity Industry
Equitrans Midstream Corp. /zigman2/quotes/205653347/composite ETRN 90.2% Oil & Gas Pipelines
Tetra Technologies Inc. /zigman2/quotes/209715792/composite TTI 84.6% Oilfield Services/Equipment
Apache Corp. /zigman2/quotes/200648444/composite APA 71.8% Integrated Oil
Core Laboratories NV /zigman2/quotes/207238091/composite CLB 66.1% Oilfield Services/Equipment
Oneok Inc. /zigman2/quotes/205201756/composite OKE 66.0% Oil & Gas Pipelines
U.S. Silica Holdings Inc. /zigman2/quotes/206361964/composite SLCA 63.1% Other Metals/Minerals
Archrock Inc. /zigman2/quotes/206867288/composite AROC 63.1% Oilfield Services/Equipment
Nabors Industries Ltd. /zigman2/quotes/202661377/composite NBR   62.8% Contract Drilling
Denbury Resources Inc.   60.5% Oil & Gas Production
Gulfport Energy Corp. /zigman2/quotes/226807363/composite GPOR 59.7% Oil & Gas Production
Consol Energy Inc /zigman2/quotes/208773703/composite CEIX 58.7% Coal
Laredo Petroleum Inc. 58.1% Oil & Gas Production
Halliburton Co. /zigman2/quotes/210488727/composite HAL 57.7% Oilfield Services/Equipment
Range Resources Corp. /zigman2/quotes/205059849/composite RRC 57.5% Oil & Gas Production
Williams Companies Inc. /zigman2/quotes/205467183/composite WMB 56.7% Oil & Gas Pipelines
Exterran Corp. 53.3% Oilfield Services/Equipment
Occidental Petroleum Corp. /zigman2/quotes/207018272/composite OXY   53.1% Oil & Gas Production
Penn Virginia Corp. 51.7% Oil & Gas Production
Noble Corp. plc /zigman2/quotes/225474075/composite NE 50.5% Contract Drilling
Source: FactSet

You can click on the tickers for more about each company.

Turmoil, the economy and a silver lining

The S&P 500 hit its most recent record high Feb. 19, showing how long it took for the risk to the global economy from the spread of the coronavirus to affect the U.S. stock market. It has been too early for economic reports to show any effect from supply-chain disruptions or reduced revenue for travel-related industries to hit home.

Last week’s employment report showed the U.S. economy added 273,000 jobs during February, with the unemployment rate falling back to a 50-year low of 3.5%.

Luca Paolini, chief strategist at Pictet Asset Management in London, believes investors may stage a strong “relief rally” soon, because stock-market action “has been so brutal.”

But he also said during an interview that “it is quite unusual for a bear market to anticipate a recession even before we see negative indicators” in the U.S. A brief relief rally aside, he doesn’t expect U.S. stocks to bottom until there is a weakening of economic growth.

“Then all the bad news will be out,” he said.

/zigman2/quotes/211629951/delayed
US : U.S.: Nymex
$ 73.49
+0.10 +0.14%
Volume: 22,959
Feb. 6, 2023 1:19a
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/zigman2/quotes/210599714/realtime
US : S&P US
4,136.48
-43.28 -1.04%
Volume: 0.00
Feb. 3, 2023 4:54p
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/zigman2/quotes/219506813/composite
US : U.S.: NYSE Arca
$ 45.97
-0.31 -0.67%
Volume: 1,516
Feb. 3, 2023 4:10p
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/zigman2/quotes/210599868/delayed
US : S&P US
1,310.80
-5.02 -0.38%
Volume: 418.50M
Feb. 3, 2023 4:54p
loading...
/zigman2/quotes/205653347/composite
US : U.S.: NYSE
$ 6.96
-0.11 -1.56%
Volume: 3.56M
Feb. 3, 2023 4:00p
P/E Ratio
N/A
Dividend Yield
8.62%
Market Cap
$3.01 billion
Rev. per Employee
$1.63M
loading...
/zigman2/quotes/209715792/composite
US : U.S.: NYSE
$ 3.90
-0.01 -0.26%
Volume: 1.45M
Feb. 3, 2023 4:00p
P/E Ratio
61.61
Dividend Yield
N/A
Market Cap
$501.62 million
Rev. per Employee
$471,739
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/zigman2/quotes/200648444/composite
US : U.S.: Nasdaq
$ 42.04
-0.32 -0.76%
Volume: 5.47M
Feb. 3, 2023 4:00p
P/E Ratio
4.02
Dividend Yield
2.38%
Market Cap
$13.52 billion
Rev. per Employee
$4.84M
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/zigman2/quotes/207238091/composite
US : U.S.: NYSE
$ 26.17
+0.80 +3.15%
Volume: 330,010
Feb. 3, 2023 4:00p
P/E Ratio
63.97
Dividend Yield
0.15%
Market Cap
$1.21 billion
Rev. per Employee
$132,361
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/zigman2/quotes/205201756/composite
US : U.S.: NYSE
$ 68.56
-0.15 -0.22%
Volume: 1.97M
Feb. 3, 2023 4:00p
P/E Ratio
19.02
Dividend Yield
5.57%
Market Cap
$30.64 billion
Rev. per Employee
$8.29M
loading...
/zigman2/quotes/206361964/composite
US : U.S.: NYSE
$ 12.22
-0.02 -0.16%
Volume: 591,976
Feb. 3, 2023 4:00p
P/E Ratio
35.97
Dividend Yield
0.00%
Market Cap
$925.16 million
Rev. per Employee
$749,907
loading...
/zigman2/quotes/206867288/composite
US : U.S.: NYSE
$ 9.79
-0.06 -0.61%
Volume: 881,578
Feb. 3, 2023 4:00p
P/E Ratio
39.02
Dividend Yield
6.13%
Market Cap
$1.52 billion
Rev. per Employee
$747,224
loading...
/zigman2/quotes/202661377/composite
US : U.S.: NYSE
$ 170.43
+1.71 +1.01%
Volume: 117,620
Feb. 3, 2023 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$1.60 billion
Rev. per Employee
$243,716
loading...
/zigman2/quotes/226807363/composite
US : U.S.: NYSE
$ 63.04
+0.87 +1.40%
Volume: 117,931
Feb. 3, 2023 4:00p
P/E Ratio
7.44
Dividend Yield
N/A
Market Cap
$1.21 billion
Rev. per Employee
$11.10M
loading...
/zigman2/quotes/208773703/composite
US : U.S.: NYSE
$ 57.89
-0.12 -0.21%
Volume: 510,558
Feb. 3, 2023 4:00p
P/E Ratio
5.23
Dividend Yield
7.26%
Market Cap
$2.02 billion
Rev. per Employee
$1.15M
loading...
/zigman2/quotes/210488727/composite
US : U.S.: NYSE
$ 38.57
+0.01 +0.03%
Volume: 12.72M
Feb. 3, 2023 4:00p
P/E Ratio
22.31
Dividend Yield
1.66%
Market Cap
$35.02 billion
Rev. per Employee
$507,425
loading...
/zigman2/quotes/205059849/composite
US : U.S.: NYSE
$ 24.00
-0.43 -1.76%
Volume: 5.24M
Feb. 3, 2023 4:00p
P/E Ratio
4.84
Dividend Yield
1.33%
Market Cap
$5.80 billion
Rev. per Employee
$10.27M
loading...
/zigman2/quotes/205467183/composite
US : U.S.: NYSE
$ 32.08
-0.13 -0.40%
Volume: 7.44M
Feb. 3, 2023 4:00p
P/E Ratio
19.58
Dividend Yield
5.58%
Market Cap
$39.08 billion
Rev. per Employee
$2.35M
loading...
/zigman2/quotes/207018272/composite
US : U.S.: NYSE
$ 61.24
-1.23 -1.97%
Volume: 17.85M
Feb. 3, 2023 4:00p
P/E Ratio
5.10
Dividend Yield
0.85%
Market Cap
$55.66 billion
Rev. per Employee
$3.06M
loading...
/zigman2/quotes/225474075/composite
US : U.S.: NYSE
$ 39.31
+0.38 +0.98%
Volume: 1.32M
Feb. 3, 2023 4:00p
P/E Ratio
19.51
Dividend Yield
N/A
Market Cap
$5.31 billion
Rev. per Employee
$555,241
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