Energy Bankruptcies: On Rise. BDC Impact.

According to news reports, energy company bankruptcies are on the rise again:

“The number of oil and gas bankruptcy filings through mid-August has nearly equaled the total tally from 2018, and the aggregate debt from 2019 bankruptcy filings of almost $20 billion has already surpassed the roughly $17 billion from a year ago, according to the energy bankruptcy monitor maintained by the Houston law firm Haynes and Boone“.

The article goes on to name names: “The biggest filings this year includes the oilfield services giant Weatherford International and a slew of oil and gas producers such as Houston’s Sanchez EnergyHalcón Resources, Vanguard Natural Resources and Midland-based Legacy Reserves”. Of those only Weatherford has BDC exposure, and has been the subject of an earlier post.

However, we queried our own database of BDC-financed energy companies and found 38 names, with a total cost of $2.378bn. Of those, 25 are under-performing to some extent, or two-thirds. The investment at risk is $1.171bn at cost and is spread over 30 different public and non-traded BDCs. We’ll be working with Advantage Data to develop an even more comprehensive list of BDC-funded energy names, but readers should expect to hear more about trouble in the oil patch in the months ahead.