Intense market pressure fuels energy shorts
19 January 2016 London
Image: Shutterstock
Expectations for increased oil output following the lifting of Iran’s sanctions has put further pressure on oil prices and brought renewed vigor to short sellers targeting the beleaguered industry.
With oil prices crashing down through the $30 per barrel mark, big names such as Brent and West Texas Intermediate have seen their prices dropping to the lowest levels seen this century, according to financial data provider Markit,
For short sellers, Rex Energy and Chesapeake Energy have taken the lion’s share of interest with 41.3 percent and 32.7 percent of shares outstanding on loan respectively, according to Markit’s data.
The latest news has led short sellers back to Rex Energy, with short positions increasing 15 percent since the start of the year, while the stock has fallen another 31 percent.
Chesapeake’s short interest also remains at record highs with the demand to short the company surging as measured by the cost to borrow, which is above 20 percent, with 87 percent of available stock to lend utilised.
The average financial leverage rank across the top 10 most shorted US energy names is 69, which is 50 percent higher than the universe average of 44 consisting of more than 3,000 single names.
The financial leverage factor is the sum of the trailing 12-month pre-tax income and the trailing 12-month interest expense divided by the trailing 12-month pre-tax income.
To put this in perspective, Rex Energy and Chesapeake Energy’s financial leverage ranks come in at 86 and 83 respectively.
With oil prices crashing down through the $30 per barrel mark, big names such as Brent and West Texas Intermediate have seen their prices dropping to the lowest levels seen this century, according to financial data provider Markit,
For short sellers, Rex Energy and Chesapeake Energy have taken the lion’s share of interest with 41.3 percent and 32.7 percent of shares outstanding on loan respectively, according to Markit’s data.
The latest news has led short sellers back to Rex Energy, with short positions increasing 15 percent since the start of the year, while the stock has fallen another 31 percent.
Chesapeake’s short interest also remains at record highs with the demand to short the company surging as measured by the cost to borrow, which is above 20 percent, with 87 percent of available stock to lend utilised.
The average financial leverage rank across the top 10 most shorted US energy names is 69, which is 50 percent higher than the universe average of 44 consisting of more than 3,000 single names.
The financial leverage factor is the sum of the trailing 12-month pre-tax income and the trailing 12-month interest expense divided by the trailing 12-month pre-tax income.
To put this in perspective, Rex Energy and Chesapeake Energy’s financial leverage ranks come in at 86 and 83 respectively.
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