Energy companies are facing another huge problem

Before you go, we thought you'd like these...
Before you go close icon

Challenges Facing Energy Companies

The oil crash has had a broad impact on corporate America.

Oil companies have been defaulting on their debts, and personal default rates for things like mortgages and car loans are jumping in the oil patch.

That has started infecting other areas of the economy, with companies from multiple industries citing pain in the oil patch.

There is another longer-term problem looming on the horizon for oil companies, according to Citigroup: pensions.

In a note out Monday, Tobias M. Levkovich and his team took a look at pension pressure in the US.

To recap, there was a $376.6 billion shortfall between pension fund assets and pension obligations in corporate America in 2015. That is down slightly from 2014, but the gap still represents a significant problem.

RELATED: Clean energy alternatives

Clean energy alternatives - Obama
See Gallery
Clean energy alternatives - Obama
UNITED STATES Ð AUGUST 26: Wind turbines spin above fields near Carroll, Iowa on Monday, Aug. 26, 2013. (Photo by Bill Clark/Getty Images)
Canada, Ontario, Niagara, Hydro Electric Power Station and bridge to the United States. (Photo by: Eye Ubiquitous/UIG via Getty Images)
FILE- In this file photo made July 14, 2009, wind turbines line a ridge on Stetson Mountain in Stetson, Maine. The state became the regional wind power leader under Democratic Gov. John Baldacci, but change is in the air as Gov. Paul LePage makes an aggressive push away from his predecessor’s renewable energy policies. The outspoken Republican, who says wind power is too expensive, is looking to hydropower from Canada and natural gas to bring down electricity prices that are among the highest in the country. (AP Photo/Robert F. Bukaty, File)
FILE - In this April 3, 2015 file photo, President Barack Obama walks through a solar array at Hill Air Force Base, Utah, to speak about clean energy. The growth of renewable energy outpaced that of fossil fuels in the electricity sector last year, with a record 135 gigawatts of capacity added from wind, solar, hydropower and other natural sources, a new study shows. The annual report released early Thursday, June 18, 2015 in Europe by Paris-based REN21, a non-profit group that promotes renewable energy, underscored how China, the world’s top consumer of coal, has become a global leader in clean energy, too. (AP Photo/Carolyn Kaster, File)
Maintenance crews work on the dam at Lake Red Rock, Monday, Aug. 26, 2013, near Pella, Iowa. A power company wants to build a hydroelectric plant at the dam _ a project that reflects renewed interest in hydropower nationwide that could bring changes to scores of American dams. (AP Photo/Charlie Neibergall)
IMAGE DISTRIBUTED FOR BMW OF NORTH AMERICA - BMW donates 20 BMW i3 electric vehicles to NYC Parks in support of the TreesCount! census during a press conference at Julio Carballo Fields on Tuesday, May 19, 2015 in the Bronx Borough of New York. (Photo by Scott Gries/Invision for BMW of North America/AP Images)
Tesla's newest product "Powerwall" is unveiled on stage in Hawthorne, Calif., Thursday, April 30, 2015. Tesla CEO Elon Musk is trying to steer his electric car company's battery technology into homes and businesses as part of an elaborate plan to reshape the power grid with millions of small power plants made of solar panels on roofs and batteries in garages. (AP Photo/Ringo H.W. Chiu)
In this Thursday, Feb. 5, 2015 photo, a parking spot is marked for electric vehicles as Michael Beinenson stands next to his car as it charges outside his workplace in Alpharetta, Ga. Georgia’s generous $5,000 tax credit for electric vehicles is the target of three separate bills in the state House, including one lawmaker trying to end the write-off altogether. “Without the credit, I think we’ll have a shock in the cycle,” said Michael Beinenson, president of the EV Club of the South. (AP Photo/David Goldman)
In this Thursday, Feb. 5, 2015 photo, a sign designates a parking space and charging station for electric vehicles outside a supermarket in Alpharetta, Ga. Electric vehicles are particularly popular in metro Atlanta, where electric vehicle owners can use highway lanes off-limits to solo drivers in a traditional car and a Nissan dealership runs regular radio ads claiming best in the nation sales of the plug-in Leaf. (AP Photo/David Goldman)
Tesla product specialist Kat Brand demonstrates how to plug in the electric car at a dealership for the vehicle, Wednesday, Feb. 4, 2015, in Seattle. Washington state's Senate is still figuring out policy on the electric cars gaining popularity, Tesla among them. Bills discussed in hearings this week would extend the sales/use tax exemption for clean-fuel vehicles and require King/Pierce/Thurston counties to give incentives to builders for adding electric-charging stations to projects. (AP Photo/Elaine Thompson)
IMAGE DISTRIBUTED FOR NRG - The NRG shared solar project in Freetown, Massachusetts, Monday, July 27, 2015. This is the first NRG shared solar, or "community solar," facility in Massachusetts that allows customers to lock in their electricity prices for 20 years. With already 100% of the facility's output powering customers, this 1-megawatt site will service roughly 160 residents in the region. (Aynsley Floyd/AP Images for NRG)

Here is Citigroup (emphasis added):

"Pension under-funding continues to be a major issue for S&P 500 constituents as very respectable equity market gains over the last seven years have not substantially alleviated pension pressures. The S&P 500 has appreciated by more than 200% at the end of 2015 since the low in March 2009 but the aggregate underfunded status of $376 billion in December 2015 is now 22% higher than the $308 billion under-funding peak seen in December 2008."

Here is a chart showing the breakdown over time:

Screen Shot 2016 08 22 at 11.48.56 AMLOC

The bad news for the energy sector, and energy workers, is that it is mostly capital-intensive companies with defined benefits programs that dominate the list of underfunded companies. Here is Citigroup again:

"All ten S&P 500 sectors remain underfunded, with Energy continuing to be the least funded sector. As the overall S&P 500 pension funding status ticked up slightly, it is worth noting that only 30 companies within the S&P 500 were fully funded at year-end 2015, with nearly half of the overfunded companies coming from the Financials sector."

And here is the chart:

Screen Shot 2016 08 22 at 11.51.25 AMLOC

NOW WATCH: This animated map shows the most probable path to a Trump victory

More from Business Insider:
Wall Street just found another recession signal
13 incredible facts about Texas
Energy companies are facing another huge problem

Read Full Story


S&P 500 2,207.54 15.59 0.71%
DJIA 19,264.01 93.59 0.49%
NASDAQ 5,308.51 52.86 1.01%
DAX 10,676.06 162.71 1.55%
HANG SENG 22,505.55 -59.27 -0.26%
NIKKEI 225 18,274.99 -151.09 -0.82%
USD (per EUR) 1.07 0.01 1.41%
USD (per CHF) 1.01 -0.01 -0.50%
JPY (per USD) 114.72 1.22 1.07%
GBP (per USD) 1.27 0.00 0.37%

From Our Partners