WSJ: Oil-Industry Debt Mounts Up

From the Wall Street Journal online:

Oil and gas companies are continuing to pile up debt, a trend some warn could extend the slump in energy prices and hit economies reliant on the sector for growth and tax revenue...

The rise is largely due to a high number of bond sales in Europe, the Middle East and Africa, and in the U.S., where both Exxon Mobil Corp. and Chevron Corp. have recently tapped investors...

Add in syndicated bank loans and total borrowing by the oil-and-gas sector rose to $2.5 trillion at the end of 2014, up from $1 trillion of outstanding debt at the end of 2006, according to the Switzerland-based Bank for International Settlements.

It has warned that an “oil-debt nexus” could create a vicious circle whereby overindebted companies pump more oil to ensure they can pay interest on their loans, adding to the current global oil glut, and further depressing energy prices.

“Rapidly rising leverage creates risk exposures in the nonfinancial corporate sector that may be transferred across the global financial system,” it said in a recent report.

Any selloff of oil-company debt could hit corporate bond markets hard, given the huge amounts outstanding, the bank said...
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Link: http://www.wsj.com/articles/oil-industry-debt-mounts-up-1430166847