Phil Lookadoo in Houston Chronicle: Unexpected Rise in Stockpiles Sends Oil Back Down


On a day when U.S. energy companies could've been cheering an expected victory to lift a decades-old crude export ban, domestic oil producers got whacked by a fresh fall in crude prices and a decision by the Federal Reserve to raise interest rates.

The Fed's decision to boost interest rates to a range between 0.25 percent and 0.5 percent could heighten worries for some struggling energy companies by requiring them to spend more to pay down debt, said Phil Lookadoo, a partner at international corporate law firm Haynes and Boone whose practice includes energy, power and natural resources.

"If they haven't put hedges in place, this increase in debt services cost is something they'll have to manage on top of their already declining revenues from lower crude prices," he said.

But the change in federal monetary policy, expected to roll out gradually over time, isn't expected to hurt the most financially distressed companies, which have been taking on debt at extremely high interest rates from high-yield markets.

"This is probably a non-event for them," Lookadoo said.

Excerpted from the Houston Chronicle. To read the full article, click here (subscription required).

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