Does Energy Collapse Resemble Tech’s 2000 Bubble Bursting?
At last count, there were 59 Chapter 11 bankruptcy filings from companies in the oil and gas business. The Energy sector, as a whole, has felt the hit profoundly with earnings falling -56.4% in Q3 2015 and -78.6% in Q4 2015. For Q1, the damage is estimated to be even worse, with the current Zacks estimate being a -114.5% earnings drop in Q1. The latest two companies to file for bankruptcy were Midstates Petroleum (ticker: MPO) and Ultra Petroleum (ticker: UPO). Additionally, with a handful of other small players likely in line at bankruptcy court, it may not be long before the oil and gas sector overtakes the 68 bankruptcy filings seen by Telecom during the dot com bust in 2000. We believe the sector is in the long process of bottoming out, but it may be too early to start-in on the bullish bets. On the earnings front, one of the latest reports from a big player came from Royal Dutch Shell, which reported a 63% decline in earnings per share for Q1.
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