The energy industry continues to be pummeled by weak oil prices, which have renewed their slide in recent weeks. This weakness is really starting to spill over into the credit market, making it tougher for energy companies to get funding. These credit worries are weighing down energy stocks that either rely on debt as a key funding source, or have a lot of it on their balance sheet. That was clear by looking closer at the three most beaten down energy stocks this week, which according to S&P Capital IQ data, were Seadrill Partners (NYSE:SDLP), California Resources Corp (NYSE:CRC), and Teekay Corporation (NYSE:TK).
Seadrill Partners plunged earlier this week due to renewed worries that its distribution would be cut. It turned out that those worries were well founded, with Seadrill Partners announcing a 55% distribution cut at the end of the week. With the company growing concerned about its financial flexibility and looming contract renewals, it felt that the cut was the prudent thing to do until the market settles down.
Funding worries were also the driving factor behind Teekay Corporation's decision to dramatically reduce its payout, as well as the payouts for its MLPs Teekay Offshore (NYSE:TOO) and Teekay LNG Partners (NYSE:TGP). Teekay took the biggest hit after slashing its distribution 90%, largely because its main source of income are distributions from Teekay Offshore and Teekay LNG Partners, which also announced significant distribution cuts. That said, the company felt this was the prudent move to make considering the current market environment as well as its funding needs.
Finally, California Resources slipped this week amid lower oil prices and the finalization of a bond exchange deal. The company exchanged $2.8 billion of its bonds in a deal that will lower its outstanding principal by more than $500 million. However, investors didn't like that cost, with California Resources' interest expenses rising by more than $20 million as a result of this deal.
To learn more about why these stocks moved so sharply this week, check out the following slideshow.