Banks Loosen Purse Strings for Shale Drillers Amid Oil Rally
Banks Are Extending More Credit to Shale Drillers Amid Oil Rally
(Bloomberg) -- 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.
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