Oil & Gas – The Night King cometh

The crude market has outdone itself, according to CreditSights, with all energy subsectors negatively affected by sliding prices triggered by the oil price war and the ongoing spread of the coronavirus. As a result, the firm has taken a closer look at its IG and HY E&P coverage given the new reality for commodity prices, stress testing credit metrics under $25, $35 and $45/bbl of WTI crude. Using the $35/bbl WTI scenario, 5 of 12 investment grade names under CreditSight’s coverage will have leverage above 3x on a hedged basis and 8 of 12 names are above 4x on an unhedged basis; most of the HY E&Ps would see leverage north of 15x. Nothing will be spared as crude price plummet and energy allocations are cut across the board, says the firm.