The highly dreaded season of semi-annual bank borrowing-base redeterminations has come and mostly gone with relatively few E&Ps getting the anticipated death knell. Many feared credit limits would be reset below a company's current borrowings and with no cash to make up the difference. The rolling event was supposed to throw a flurry of assets into the marketplace. While it's no consolation to those currently fighting getting dismantled in the bankruptcy courts, (ie. Crusader Energy, Energy Partners) like the Swine Flu, the Redetermination Pandemic resulted in few fatalities in spite of the hysteria and few assets offered. Why is this? The simple answer is that banks, also under assault in the current economic battle, have no place and no desire to warehouse all of those E&P assets. Like with the single-family housing foreclosure crisis, banks don't want all these assets coming back on the books and tying up their lending ratios. Keep in mind that when the banks take back these assets, they don't have a buyers market for selling them. After all, buyers are having a hard time getting capital for acquisitions due to tight lending practices by---banks. Better to work it out with an otherwise healthy E&P currently making payments than to repo their assets. And as these E&Ps jump this hurdle, they are quick to shout their financial stability in celebration. Some recent examples of these include: • Carrizo Oil & Gas received a $40 million increase to $290 million. • Stone Energy's base was approved at $425 million, exactly the amount owed. • Rex Energy was reaffirmed at $80 million with $5 million outstanding. • Encore Acquisition's base was lowered from $1.1 billion to $900 million, essentially the same following a $190 monetization of commodity derivatives. • Whiting Petroleum's base was increased from $900 million to $1.1 billion with $610 million drawn. • Contango Oil & Gas holds steady at $50 million with no debt outstanding. • SandRidge Energy was reaffirmed at $1.095 billion while basis points were raised by 75 to 100 and commitment fees to a flat 50 basis. • EV Energy Partners was revised to $465 million with $440 million outstanding and $26 million cash on hand. • BreitBurn Energy dropped from $900 million to $760 million, still above its $717 million borrowings but enough to put it on a distributions diet to pay down debt. • Approach Resources was reaffirmed at $100 million with amendments to terms set higher. • Concho Resources was reset from $1.2 billion to $960 million with terms increased. • Rosetta Resources was restated from $400 million to $375 million. So breath a sigh of relief. The reaper has come and gone. At least until October, when we do this all over again, and sustained low commodity prices combined with hedges rolling off late in 2009 could start the pandemic frenzy all over again. (For an analysis on bank-borrowing redeterminations by Tudor, Pickering, Holt & Co. Securities, click here.)
Recommended Reading
SilverBow Rejects Kimmeridge’s Latest Offer, ‘Sets the Record Straight’
2024-03-28 - In a letter to SilverBow shareholders, the E&P said Kimmeridge’s offer “substantially undervalues SilverBow” and that Kimmeridge’s own South Texas gas asset values are “overstated.”
SM Energy Declares Quarterly Cash Dividend
2024-03-26 - SM Energy’s dividend will be paid out on May 3 to stockholders on record as of April 19.
Matador Stock Offering to Pay for New Permian A&D—Analyst
2024-03-26 - Matador Resources is offering more than 5 million shares of stock for proceeds of $347 million to pay for newly disclosed transactions in Texas and New Mexico.
Par Pacific Asset-based Revolving Credit Bumped Up by 55%
2024-03-25 - The amendment increases Par Pacific Holdings’ existing asset-based revolving credit facility to $1.4 billion from $900 million.
California Resources Corp. Nominates Christian Kendall to Board of Directors
2024-03-21 - California Resources Corp. has nominated Christian Kendall, former president and CEO of Denbury, to serve on its board.