New Report from S&P Capital IQ Says All Not Affected Equally By Sustained Drop in Oil Prices

May 08, 2015 / 09:00 AM
New York, NY

New York, NY – May 7, 2015 --   Although prices at the pump have stopped sliding, the energy industry is only beginning to see the effects of lower priced oil, says a new report from S&P Capital IQ published today.  Offering insights from a number of industry vantages, the report confirms that traders, investors, and oil companies alike have either already taken advantage of disruptions in the futures market or are acting on a belief that prices will rise in the near term and, in some cases, storing crude in unprecedented amounts.   Bentek, a division of Platts, estimates oil supplies as high as 85% of overall current storage capacity.   For a copy of S&P Capital IQ’s latest Sector IQ: Energy report, click here.

The S&P Capital IQ Sector IQ report, much of it unveiled last week at the firm’s 7th annual Houston Energy Symposium, analyzes scenarios for how much more storage capacity the US might have.  In addition, it provides an evaluation of the effects of the financial pain that many companies may already suffer from while also looking ahead at who might stumble next. From an investor perspective, the Sector IQ report also explores how equity analysts’ opinions and recommendations have evolved and what investment strategies have been effective since oil started sliding.

Stewart Glickman, Group Head for Energy Equity Research at S&P Capital IQ, points out that valuations of upstream energy companies which dominate the market capitalization in the sector are getting rich. “While EBITDA estimates are getting slashed, valuations haven’t really pulled back all that much, so on an EV-to-EBITDA basis, valuations are significantly above typical forward averages”.

Credit conditions are another key theme explored in the report with commentary from both S&P Capital IQ and S&P Ratings.  Thomas Yagel, Vice President at S&P Capital IQ says “while quantitatively measured risk levels have improved since the beginning of the year the first quarter of 2015 has already seen more US bankruptcies of companies over 100M at filing than all of 2014.”

 Additional findings in this report include:

  • Capital spending by upstream players is now in the early stages of a major pullback after years of steady increases while, somewhat surprisingly, production levels continue to exceed on a YOY basis
  • Energy credit spreads have recently compressed because the sector has rebounded from its sharp selloff in the fourth-quarter of 2014.
  • The top-five largest company movers tightened and widened by an average of 37.1% and 20.2%, respectively. With spreads tightening in only two firms last quarter, the market has swung the other way with CDS (credit default swaps) improvements for about 80% of the sector’s firms during the first quarter.

Produced by S&P Capital IQ in association with area specialists at S&P Ratings Services, S&P Dow Jones Indices and Platts, Sector IQ: Energy provides quarterly insights and analysis on the changing economics and market conditions affecting global energy supply and demand.  To subscribe or request an earlier issue, contact

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