Like many American energy companies that have been striving for months to deal with sagging oil prices, RAAM Global Energy Co. started financially running out of gas a while back. The Kentucky-based company, which drills offshore in the Gulf of Mexico and onshore in Texas, Louisiana, Oklahoma and California, has been struggling since the decline in oil and natural gas prices in 2014, according to chief restructuring officer James R. Latimer III.
RAAM is not alone. According to Fitch Ratings, the default rate among U.S. energy companies, an indicator of the industry’s level of distress, currently stands at about 5 percent, the highest level since 1999, when it registered 10 percent. The default volume for exploration and production companies, like RAAM, is the highest it’s been in five years, at $10.4 billion in debt. The broader U.S. corporate default rate was 2.9 percent through September, Fitch states. However, Fitch projects the U.S. high-yield default rate to end 2015 at around 3.5 percent. The higher expectation reflects ongoing strife in the energy and metals/mining sectors, according to Fitch.
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