From Wall Street Journal

Bah, humbug.

While it is the wrong season for “A Christmas Carol,” U.S. oil and gas producers are bracing for words to that effect from their lenders. Redetermination season, a twice-yearly ritual in which banks reassess credit lines, is once again upon us, and they are likely to be Scrooge-like. The result could be that more companies are forced into financially desperate types of financing or bankruptcy filings.

U.S. oil and gas producers depend disproportionately on bank credit lines to run their businesses. In normal times the seesaw of commodity prices makes redeterminations a pretty ho-hum affair, but the sharp swoon since mid-2014 is spooking banks. Even so, last spring’s redetermination came after a brief rebound in prices and successful stock and bond issues by several firms. And last fall banks were relatively generous, cutting borrowing bases by just 11% according to analysts at Raymond James.

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