Underfunded pensions may bite U.S. energy sector

HOUSTON (Reuters) – Oil majors Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz), ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) and other energy companies top the list of U.S. companies with severely underfunded pensions — a situation that may drain precious cash in a time of capital market volatility, especially at smaller firms.

A sell-off in crude oil and natural gas prices has already prompted many energy companies to rein in spending and conserve cash, but the sector may also see earnings pinched by contributions needed to make up for shortfalls in defined pension plans.

And while no significant financial strain is expected right away, analysts said the expected jump in obligations bears watching.

“It certainly could become an issue for some of these guys because the market has been lousy,” said Phil Weiss, energy analyst with Argus Research. “And in this lousy market, they still have these pension obligations.”

Reuters