The energy industry is particularly capital intensive, meaning that access to the equity and debt markets is critical to the survival and growth of companies in this sector. While the current economic climate has only exacerbated the need for access to liquidity—as reduced revenue resulting from historically low energy prices have required energy companies to seek additional capital—energy companies are looking beyond traditional offerings of straight debt or common equity. 

Considering their present stock prices, energy companies are reticent to issue common equity securities because low trading prices mean equity issuances would be significantly dilutive. Further, energy companies have found it difficult to obtain debt financing on commercial terms when their balance sheets are already stressed due to market conditions. 

Therefore, energy companies have looked to preferred stock as an alternative financing source for their existing operations and future capex. Preferred stock can provide maximum flexibility for both the company and the investor. 

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