Haynes and Boone Fall Borrowing Base Redeterminations Survey Amasses Widespread Media Coverage


UPDATED: 04/04/2017

The fall edition of the Haynes and Boone Borrowing Base Redeterminations Survey continues to garner global media attention as US energy companies struggle to cut costs and keep afloat through the steep decline in oil and gas prices.

As quoted in Bloomberg, “Oil producers in the U.S. are about to see their credit lines shrink, just when they need the money most. The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow… Companies’ credit lines will be cut by an average of 39 percent, the survey showed.”

Based on responses from oil and gas executives, financiers, investment banks and private equity firms, the unique survey and accompanying seminar held in New York, "Oil & Gas Financing and Investment Series: Recent Developments in Second Lien Financings, Restructurings and Bankruptcies in the Oil Patch," has drawn the attention of outlets such as Economist, Financial Times, American Banker, Energy Monitor Worldwide, and others.

Partner Jeff Nichols, head of the firm’s Energy Finance Group, told Oil & Gas 360, “Our objective was to gain quantifiable insight into how the oil and gas industry, financers and producers alike, are reacting to the decline in oil and gas prices. What really stood out to us was the contrast between the results of the spring and fall survey. 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 needs to be taken to reduce debt through equity investment, restructuring or even declaring bankruptcy.”

These borrowing base redeterminations this fall are key to whether or not some producers will file for bankruptcy or pursue debt restructuring over the next few months. Buddy Clark, chair of the firm’s Energy Practice Group, told the Financial Times that investors should be sure to read the fine print when the borrowing limits are announced. “In some cases borrowing bases will be set at a comfortable level, but could be scheduled to reduce over six months, or have a shorter review period. The hope is that the market will pick up in time to allow them to sell equity to shore up the balance sheet.”

Clark also noted to Oil and Gas Investor, “We don’t know how long it will take, but we do know that at some point, prices will rise and the industry will bounce back. When regulators are pressuring banks to clean up their energy portfolios, they should be taking this into consideration. If financiers have confidence in the rise in oil and gas prices, they should be looking for opportunity to provide financing to producers for bottom dollar now with confidence that they will come out on top.”

To view a summary of the survey findings, click here.

To view the presentation slides and a recording of the live presentation, click here.

Links to coverage:

Financial Times (a)

Financial Times (b)

The Economist

Oil & Gas 360


Natural Gas Intelligence

Oil Pro

Houston Business Journal

Houston Chronicle (subscription required)

Law360 (subscription required)

American Banker (subscription required)

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