Wells Fargo energy investment unit faces losses

Well Fargo was one the shareholders of Cubic Energy Inc, which bankruptcy plan took effect on March 1,  the Dallas-based oil and gas company wiped out.

The bank had a nearly 10 percent stake in Cubic Energy at the end of 2015, worth more than $25 million at the company's peak, through a private equity-style unit called Wells Fargo Energy Capital.

The No. 3 U.S. bank by assets, like its rivals, has billions of dollars' worth of exposure to the struggling energy industry through regular loans that are souring. But the case of Cubic Energy shows that Wells Fargo went further into risky areas than other banks, and may now face a reckoning.

The whole sector has been devastated by a 60 percent plunge in oil prices from highs of over $100 a barrel in 2014. The price drop has squeezed energy firms, especially smaller ones, and made it harder for them to pay back loans.

Some of Wells Fargo's most volatile exposure sits within Wells Fargo Energy Capital, a unit that sought fat returns through equity investments and high-risk loans to small companies like Cubic Energy, assuming the energy boom would last.