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Banks Loosen Purse Strings for Shale Drillers Amid Oil Rally

Banks Are Extending More Credit to Shale Drillers Amid Oil Rally

Banks are gradually offering more credit to U.S. shale oil and natural gas producers as the industry recovers from last year’s contraction and energy prices rally.

So-called borrowing bases will increase as much as 20% during the imminent round of talks between drillers and lenders, according to most respondents in a survey conducted by law firm Haynes & Boone LLP.

The findings indicate a continued improvement after the dire conditions experienced in the oil and gas sector last year, when the pandemic and global gluts led to a slump in energy prices and prompted banks to cut back on lending.

The previous Haynes & Boone survey, published in April, indicated borrowing bases would remain flat or rise 10%. Lending against crude and gas reserves, a key source of capital for explorers, typically sees semi-annual retederminations, in which bankers reassess their commitments.

To take one recent example, HighPeak Energy Inc., a Texas producer, disclosed Monday in a filing that its borrowing based was raised to $195 million from $125 million.

Almost two-thirds of respondents in the Haynes & Boone survey also said they expect public equity markets to reopen for E&P companies next year, after being largely shut to them since 2018.

©2021 Bloomberg L.P.