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By Bloomberg

The number of least-creditworthy companies has jumped to a two-year high as the oil rout pummeled the ratings of U.S. energy producers, according to Moody’s Investors Service.

Energy XXI Ltd. and Midstates Petroleum Co. were among 12 borrowers in the oil and gas sector added to a list of the lowest-rated companies in the past quarter, Moody’s said Friday in a report. As of March 1, oil and gas borrowers made up almost 14 percent of the list, the largest representation of any industry and the segment’s highest percentage ever.

Crude’s 50 percent plunge since July has prompted a record slowdown in the number of drilling rigs seeking oil in the U.S., stoking concern that oil companies will struggle to service the $120 billion of junk-rated debt they took on in the past three years amid the U.S. shale boom. Energy XXI, which had its rating cut to B- by Standard & Poor’s earlier this month, paid one of the steepest interest rates in the U.S. credit market this year to head off a potential squeeze by its lenders.

“Liquidity issues going forward are the main driver for recent downgrades and it’s why more companies joined the list over the last three months,” Julia Chursin, one of the author’s of the report, said in a telephone interview.

A total of 28 companies were added to the Moody’s list of borrowers ranked B3 with a negative outlook or lower, the New York-based company said in the report. The number rose to 184 as of March 1, a two-year peak, up 6 percent from 174 last quarter, according to the report. Until the most recent quarter, oil and gas companies on average had made up 8 percent of the list since it began in March 2009.

Boosted Offering

Energy XXI earlier this month boosted a bond offering that yielded 12 percent to $1.45 billion from $1.25 billion, according to a person with knowledge of the deal at the time who asked not to be identified citing lack of authorization to speak about the transaction.

The company’s borrowing base under its $1.5 billion credit line is scheduled to be reset at the end of this month, according to Fitch Ratings, which said in a March 4 report that it would be reduced to $500 million.

Midstates Petroleum entered into an amendment on Tuesday that keeps its borrowing base at $525 million, according to a regulatory filing.

Covenant Relief

Lenders for the company eased financial covenants and in March waived certain events of default, Bloomberg Intelligence analyst Spencer Cutter wrote in a report. Moody’s lowered Midstates’ credit rating to Caa1, seven levels below investment grade, from B3 in January.

Greg Smith, a spokesman for Energy XXI, and Chris Delange, a Midstates spokesman, didn’t immediately return telephone calls seeking comment.

Other energy companies joining the Moody’s list in the past three months include Samson Investment Co., Sidewinder Drilling Inc. and Halcon Resources Corp.

Non-financial borrowers are added to the list either through a rating cut or an assignment of a grade in that range. They are removed as a result of a rating increase or withdrawal, or a default.

The list peaked at 290 borrowers, 25 percent of U.S.-rated corporate issuers, in the first quarter of 2009.