OREANDA-NEWS. US shale oil producers such as Laredo Petroleum and Goodrich Petroleum are issuing new shares at a rapid pace this year to service debt and pay for drilling and other expenses as lenders clamp down.

Equity offerings by oil and gas companies have touched \$7.5bn since the start of the year. That is more than double the quarterly average of about \$3bn since the start of 2008 and exceeds the total made in all of 2009, according to analysts at Tudor Pickering Holt.

"If the pace of E&P [exploration and production] equity issuance feels dizzying, it is," Tudor Pickering said.

Recent share offerings include Laredo Petroleum (\$760mn), Antero Resources (\$485mn), Oasis Petroleum (\$409mn), Parsley Energy (\$231mn) and Goodrich Petroleum (\$49.8mn).

All the companies will use the money to repay part of their outstanding debt, but some like Concho and Antero may also tap it to snap up distressed assets. Antero could look to mergers to boost its core Appalachian position, analysis firm Oppenheimer said.

US independent producers are under pressure to act quickly. Their total outstanding debt of \$247bn is double that of the next biggest industry in the high-yield debt universe, which is the banking and insurance sector with about \$100bn, according to Fitch Ratings. And the stress is showing: Quicksilver Resources, with \$1.17bn in debt outstanding, American Eagle Energy, with \$175mn, and Saratoga Resources, with \$125.2mn, have already missed payments, Fitch said.

High-yield debt is issued by companies or municipalities that have a credit rating lower than investment grade, meaning they pay a higher interest rate because the default risk is higher.

The problem is deeper than just oil market fundamentals. The US Federal Reserve's decision last year to end its bond buying program is sapping available dollars and raising the specter of higher interest rates, limiting lenders' ability to offer cheap and abundant credit. The so-called quantitative easing measures, started in 2008, had weakened the dollar as supply rose, which in turn supported commodities that are priced in the currency and had partly aided in keeping oil above \$100/bl through most of those years.

Sources of funding are drying up for US oil and gas producers because of the overall lack of liquidity and poor ratings, leaving share sales as one of the rare available routes. Meanwhile majors such as ExxonMobil and Chevron can still tap the debt market with topnotch ratings. ExxonMobil raised \$8bn on 3 March in its largest ever bond offering, while Chevron raised \$6bn last month.

Making matters worse is the series of ratings downgrades [debt downgrades] producers have faced since the collapse in oil, raising their cost of debt. Lower risk issuers are just 27pc of the total energy high-yield debt market, down from 49pc in 2013, while junk-rated energy debt increased to 22pc from 9pc, Fitch said. The \$53.8bn in junk-rated energy debt is greater that the next two industries combined.

Energy high-yield debt has ballooned by \$30bn since the start of the year partly because of downgrades from investment grade. "The energy landscape has changed considerably in the past two years," Fitch said.

Fort Worth, Texas, based Quicksilver Resources said it won't make about \$13.6mn in interest payments due 17 February, but the company has a 30-day grace period before the non-payment becomes a default. The company is weighing its options to improve liquidity, but may seek Chapter 11 bankruptcy protection if those measures don't bear fruit.

American Eagle, which stopped drilling in November, had \$9.8mn due on 2 March and is using a grace period "to determine whether to make the interest payment."