Buddy Clark in The Financial Times: Energy bondholders at risk as bank loans ebb


April in Texas traditionally marks the start of the spring thunderstorm season. This April, the tempestuous weather looks set to be accompanied by an additional financial squall for the state’s oil and gas companies as banks begin cutting back on the reserve financing on which these firms rely.

Such financing is typically re-evaluated twice a year, usually in October and April, and is tied to the value of the borrowing firms’ oil and gas reserves and related assets such as pipelines ... 

“The problem they’re going to face is that their availability of capital from the banks is limited by the collateral value attributed to their assets,” says Buddy Clark, who heads the energy practice at Dallas-based law firm Haynes and Boone.

He says that during last October’s redeterminations banks were using an oil price of $80 a barrel. Based on a recent informal survey of bank lenders by his firm, prices are coming down significantly, with at least one lender now pricing at $50 a barrel for 2015.

Excerpted from The Financial Times on January 19, 2015. To view the full article, please click here (free registration required).

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