Default Rate Set to Rise Among Oil and Gas Producers, Moody's Says

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From Moody's:
The 12-month default rate forecast for Oil and Gas companies rated B2 or below in the Exploration and Production (E&P) sector is estimated to more than double in the year ahead, Moody's Investors Service said in a new report.

Moody's default-forecasting model estimates that the one-year portfolio-average baseline default rate for these companies will increase from 2.7% to 7.4%.

"With a gradual recovery in energy prices, the weaker oil & gas issuers are at a much greater risk of default," said Moody's Senior Vice President David Keisman. "The companies on the lower end of spec-grade ratings are the ones that should be most worried."

As of May 1, 2015, the oil and gas sector comprised 15% of companies rated B3 or lower -- the largest share for any sector included on this list of ratings across US corporate sectors, Moody's Associate Analyst Julia Chursin states in the report, "Oil and Gas: The Bad, Ugly and Good." The percentage is nearly double the 8% of oil and gas companies that occupied the list of US companies rated B3 negative or lower a year ago.
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