Energy Companies Pay Up to Raise Cash

Wall Street Journal ^ | 27 March 2016 | Corrie Driebusch and Ryan Dezember

[Lorianne]

Firms sell more shares at lower prices, deepening pain for stockholders ___ Energy companies tapping the stock market to fill their coffers are deepening the pain for shareholders. These firms have come to rely on selling new shares to pay down debt and keep rigs drilling. The further commodity prices and energy stocks slid, the more shares that companies have had to sell at ever lower prices to raise the desired proceeds. This has further diluted the stakes held by existing shareholders, who are already suffering from falling share prices.

The cash injections haven’t guaranteed stability for the companies selling shares, though. Emerald Oil, which sold $27.5 million of new shares last year, filed Tuesday for chapter 11 bankruptcy protection.

Wunderlich Securities estimates that a prearranged sale of Emerald’s North Dakota drilling fields will yield roughly enough to pay back its bank lenders, leaving little for other creditors and nothing for shareholders.

Those who bought roughly $50 million of stock that Goodrich Petroleum sold last March have been basically wiped out.

Much of the money raised by oil and gas producers this year has been through deals that involve banks putting up their own capital to buy a chunk of the company’s stock—below the market rate because of the risk they are taking on—before selling it to investors.

A bigger discount in these so-called block, or bought, deals reflects the risk perceived by banks when it comes to energy companies at a time when the price of oil has been fluctuating and large U.S. banks have said they are seeing more energy loans go bad.

[Lorianne]

Title makes no sense when you read article.

[MeneMeneTekelUpharsin]

Scaring folks out of energy stocks so the big Democrat and Republican boys and girls can buy them.

[Texas resident]

Buy them then nationalize them after the bailout.