‘The banks will determine who the winners and losers are’
WINNIPEG — Six years ago, Canadian oilfield services firm Calfrac Well Services commanded a $2.1 billion market value and was poised for U.S. expansion.
This year’s maturing energy debts are the most on record for the fourth year in a row and a more than 40 per cent increase over 2019, according to Refinitiv data. They are an existential threat for some companies during the worst industry crisis in decades, while others with stronger credit ratings may buy time in exchange for higher rates that hobble bottom lines.
The pace of restructurings and bankruptcies has been slow as banks have little desire to own assets, and as rebounding oil prices offer hope, said Alan Ross, regional managing partner with law firm Borden Ladner Gervais. Too many producers gorged on cheap debt to fund operations as share prices lagged and investors soured on new equity issues, said Raymond James analyst Jeremy McCrea.Potential credit rating downgrades of investment grade bonds could more than triple the amount of high-yield energy-related bonds, which are already the most of any Canadian sector in the high yield category, according to the Bank of Canada.
Prices crashed in 2014 and two years later, the company cut 500 jobs. Even so, in 2017, Calfrac moved into the U.S. Permian basin.This year’s price collapse has led Canadian producers to curtail output and to scrap drilling plans, hurting service companies like Calfrac. Efforts to reach Wilks Brothers were unsuccessful. Dan Wilks has also acquired stakes in hard-hit U.S. service firms.
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