Energy junk bond defaults double in 2016

Oil wells in the Franja del Orinoco region of Venezuela (Houston Chronicle)
Oil wells in the Franja del Orinoco region of Venezuela (Houston Chronicle)

U.S. energy companies have defaulted on $39 billion in high-yield bonds so far this year, more than double the $15 billion delinquent last year, according to a new report from the ratings agency Fitch.

Almost one in three U.S. oil and gas exploration and production companies defaulted on high-yield bonds this year. One in five energy companies did. In contrast, less than 1 percent of energy companies lapsed on such loans in 2014, at the height of the shale oil boom.

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The national Venezuelan oil company, Petroleos de Venezuela, has almost $13 billion in outstanding high-yield bonds and tops Fitch’s current “bonds of concern” list. The Brazilian company Odebrecht Offshore Drilling holds $3 billion. California Resources Corp., an oil and gas company out of Los Angeles, has $2.8 billion outstanding. FTS International, a large private well completion firm out of Fort Worth, has almost $800 million out, the most of any Texas energy company.

Fitch predicts sunnier days to come: Just 3 percent of U.S. energy companies will default in 2017, representing about $6 billion, the report says.

The overall U.S. high yield default rate will also improve to 3 percent in 2017, representing almost $36 billion, in comparison to $59 billion posted so far this year and $40 billion in 2015.

Energy and metals/mining account for 84 percent of the total U.S. defaults so far this year.