Phase two of the three-part bust cycle in shale oil has just begun, as I outline in my upcoming online e-book Shale Boom, Shale Bust, due out in a few weeks.

Two of the most leveraged companies in the energy space -- Hercules Offshore  (HERO) and SandRidge Energy  (SD - Get Report) -- have recently been downgraded by separate analysts to zero, a potential death sentence. Believe me, in this second phase of restructurings and outright failures, this is only the beginning.

In the energy sector, Jim Cramer's charitable trust Action Alerts PLUS owns Royal Dutch Shell (RDS.A) and Kinder Morgan (KMI). Read the AAP team's thoughts on those companies here.

These companies represent opposite poles of the oil business. Hercules is a shallow-water drill rig specialist with 24 rigs, many of them newly built during the boom cycle in offshore drilling before 2010.

A mistimed expansion into a shallow water environment that was contracting as other competitors also sought to expand their rig fleets has left Hercules in one of the toughest spots in the offshore world -- with massive leveraged debt for new construction as well as maintenance on older rigs. And while the problems that Hercules faced were not solely tied to the collapse of oil prices in 2014, it added significantly to them.

Collapsing day rates for jackups and shallow water floaters have combined with a more dire slowdown in contracts. As of Feb. 15, Hercules had only 10 of its 24 rigs working, with four of those working rigs completing their contracts within the next three months. A scuttled contract with Saudi Aramco for one of its rigs was apparently the last straw for Mike Urban, an analyst at Deutsche Bank, as he cut his target price for HERO to zero.

SandRidge's problems also didn't begin with the crude collapse, although lower oil prices are delivering the coup de grace. Former CEO Tom Ward expanded the company with the same exuberance and overconfidence of his former partner at Chesapeake Energy  (CHK - Get Report), Aubrey McClendon. Missteps in the Gulf of Mexico and particularly in the Utica Shale have left SandRidge with a much less flexible portfolio of oil assets, and its most important stake in the Mississippi Lime shale play.

Getting in and out of poor-performing assets and disappointing results in the Miss Lime has left the company saddled with a massive debt burden. SandRidge bonds are now trading at under 70 cents on the dollar for a more than 14% yield. Today, KLR Group downgraded SandRidge to zero.

While one of these companies is a rig fleet owner and the other is an exploration and production company, both share some obvious traits -- and mark the outlines for other companies at risk for bankruptcy, or a fire-sale reorganization.

One common characteristic is leverage. With SandRidge, a likely earnings-to-debt ratio for 2015 will top five times, which is entirely unsustainable. Second is the cruel effect that low oil prices have on assets. Hercules is dependent solely on shallow water activity. With intense competition for this sub-sector and zero flexibility in revenue, a low oil price can quickly savage its number of customers and cash flow.

Others in the shallow water market or in the most expensive shale plays are sure to follow Hercules and SandRidge, as the second phase of the shale bust lingers. Obviously, not all will see their shares go to zero, but expect quite a bit more restructuring and scrambling for cash.

If you are looking at investing in the space, be diligent in looking at each firm's leverage and flexibility. Only with both are they likely to make it to phase three of the shale bust -- and beyond.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.