Bankruptcy risks on the rise for smaller offshore players

The sector is in for more pain if oil falls further.

The very real threat of bankruptcy is on the rise for smaller oil service players, according to CIMB.

CIMB said that smaller players are at risk from order cancellations by speculative investors and shorter contract tenures. The struggling sector will also suffer further if oil prices retreat to US$40 per barrel.

"Ripple effect of bankruptcy risk. Weak utilisation, rates cut are likely to deteriorate operating cash burn in 2016 among the smaller players," CIMB said.

"We believe all it takes for further derating among the oil service companies is for one t o go under restructuring t o meet financing liabilities," the report added.