It is no surprise that energy names have taken a big hit, as the price of oil has consistently traded below $50 a barrel for the better part of the year. Several energy companies filed for bankruptcy in 2015, while many others have seen their share price and debt ratings nosedive. This unfortunate combination puts pressure on the type of financing troubled energy companies can obtain, which can create a self-fulfilling death spiral for the companies, as they try to rebuild themselves in a difficult climate.
With oil prices seemingly trading at new lows every day, here are 4 companies Real Money is keeping a watchful eye on for 2016:
SandRidge Energy (SD): This Oklahoma-based oil and gas company was a favorite of Omega Advisors' Leon Cooperman during CNBC's Delivering Alpha conference in 2014. Cooperman has since abandoned the position, as the stock has fallen.
Last December, Cooperman questioned SandRidge's survival, at current prices. "If present prices persisted for several years, SandRidge's survival would be an issue," he said in an interview with CNBC. "So, I haven't added to it and it has become a smaller part of my portfolio because of the big price decline."
In 2015, SandRidge took a number of measures to shore up near-term liquidity, which included suspending its preferred dividend and initiating several bond repurchases and exchanges to address its $925 million in debt. The company now has no bond maturities before 2020. Following SandRidge's first bond exchange in August, Moody's downgraded the company even deeper into junk territory -- to Caa2 from Caa1.
'The Caa2 [corporate family rating] reflects high financial leverage and worsening credit metrics as its existing hedges roll off and the company remains significantly less hedged for 2016, leading to a potentially unsustainable capital structure with continued weak commodity prices," Moody's said.
Shares of SandRidge Energy currently trade at $0.22 and are down 88% for the year.
Goodrich Petroleum (GDP): This Texas-based company focuses on crude oil and natural gas production in Eastern Louisiana and Southwestern Mississippi. As shares of the company are down 94% for the year -- and are trading around $0.25 -- it is safe to say that the company has been hurt by lower-for-longer oil prices.
In December, Goodrich Petroleum announced that it was suspending dividend payments on its Series B, C and D convertible preferred stock. Preferred stock shareholders were invited to exchange their shares for newly issued Series E preferred shares, with the expectation that they would receive a dividend on those shares within 15 days of the issue date.
Moody's downgraded the company to Caa3 from Caa1 in September, and maintains a negative outlook on the company.
"The negative outlook reflects our assumption that leverage will remain at high levels, and further debt exchanges are likely to happen," Moody's said. "The rating could be downgraded if asset value further erodes or the company initiates a much-broader debt restructuring, e.g. bankruptcy."
Sanchez Energy Corporation (SN): Shares of this Texas-based oil and gas company are down 61% for the year, and are trading around $3.64. In May, Moody's affirmed the company's B2 debt rating, which places it just below investment grade.
"Low commodity prices and the high likelihood of an extended cyclical downturn will delay the production and reserves growth and deleveraging of Sanchez's business that were previously anticipated to support a higher rating," said analyst Sajjad Alam of Moody's in May. Alam also stated that he believed Sanchez's cash margins and liquidity would decline into 2016.
In November, the company announced that it had improved its liquidity position following the divestiture of some of its Western Catarina Midstream assets, as well as through an elected commitment of $300 million from its credit facility. The company also has no debt maturities until 2021. Sanchez has entered into a number of derivative contracts to hedge its production levels through 2016 and 2017.
Energy XXI (EXXI): Third Avenue Management's much-maligned Focused Credit Fund held notes from this Texas-based oil company. Shares of the company are down 67% for the year, and are currently trading at $1.07. On Tuesday, KeyBanc downgraded its rating on the company to Sector Weight from Outperform.
In October, Moody's lowered its rating on Energy XXI to Caa3 from Caa2 after the company repurchased some of its unsecured notes in the open market at a discount to par. Moody's viewed this repurchase as a default.
Given the dreary outlook for oil in 2016 and the liquidity pressures these companies face, the new year may be as unkind to these companies as 2015 has been.