PetroShare Corp filed for bankruptcy September 4, 2019 with a Financial Health Rating of 20, High Risk. PetroShare Corp is a Colorado based energy company formed to investigate, acquire, and develop oil and gas properties. Oil price volatility and new regulatory measures created uncertainty in investing in oil and gas development while making it even harder to attract new capital.
FHR at default; 20, High Risk
What the ratings tell you.
As shown in the Risk Trend Analysis, PetroShare Corp's FHR was trending down from Medium Risk to High Risk in 2016. The FHR continued to stay High Risk for the past few years, signaling the need for risk mitigation. Their FHR is at the bottom of High Risk with an Estimated Probability of Default of 11.41%.
With a Poor Core Health Score (CHS) of 23 and High Risk FHR of 20, PetroShare Corp is placed in Quadrant C. These companies are the riskiest as both medium-term efficiency and short-term resiliency outlooks are negative. To put this in perspective, the Oil and Gas - Producers Sector has a Core Health Score of 41 and a Financial Health Rating of 55, which both equate to Medium Risk. The Sector is in Quadrant A, meaning their peers are in a strong position from a short-term and medium-term outlook.
Where our analysis shares the story.
PetroShare Corp has shown sizeable underperformance in many metrics, which clients can review in the Peer Benchmark Report. Our below analysis showed significantly low Operating Profitability and Net Profitability which are foundations for Core Health.
Operating profit is used to cover non-operating expenses such as debt and interest. With PetroShare Corp operating at a loss, they were forced to dip into capital which resulted in decreased assets and increased debt. Our performance scores consistently show PetroShare Corp had weak resilency, making a bad situation worse. Assets and debt have changed so much the Financial Dialogue has highlighted them as areas of concern.
Leverage indicates the extent that debt is used to fund a company's operations. While utilizing debt may be efficient, it does come with the burden of meeting certain obligations. RapidRatings identifies an assets/leverage ratio greater than 40% as likely to have an affect on company strategy. PetroShare Corp's leverage equated to 64% of their assets. To make matters worse, their assets had decreased from the prior year by 41% and $23.6M worth of debt needed to be refinanced. With little cash to cover liabilities, bankruptcy was inevitable.