As a result of slumping oil prices, key players in oil and gas financing are predicting a decrease in the ability to borrow against reserves by an average of 39 percent, according to a Haynes and Boone, LLP survey conducted prior to the fall borrowing base redetermination season.
In contrast, a similar survey conducted during the spring found that the same borrowers and lenders believed there would be an average of a 25 percent decrease in borrowing bases. The percentage of borrowers predicting a base decrease has grown from 68 percent in the spring to 79 percent in the fall, according to the survey.
The fall survey was compiled from 182 responses received from a wide range of oil and gas professionals in September. About 40 percent are executives at oil and gas companies, including upstream, midstream, and oilfield services, 40 percent are financiers from commercial and investment banks and private equity firms, and 20 percent are professional services companies and others.
“What really stood out to us was the contrast between the results of the spring and fall survey,” said Houston Partner Jeff Nichols. “In the spring, it looked like the response was a ‘wait and see’ mentality. But with fall approaching, the ‘wait and see’ mentality seems to have passed and there is recognition that more action is needs to be taken to reduce debt through equity investment, restructuring or even declaring bankruptcy.”
SURVEY LINK AT END OF PAGE BELOW