An autumn credit crunch was expected to hit many independent US oil producers, starving the industry of billions of dollars and further denting company budgets and drilling plans. But banks that adjust their loans to energy companies every six months based on the oil price and volumes of reserves were more lenient than many expected this time, leaving producers with more cash for drilling and allowing them to supply more oil to a market already flush with excess crude.
The biannual process, known in the industry as predetermination, shaved only 4 percent off bank loans to oil and gas companies, according to a Reuters analysis of loan data, surprising experts who had expected deeper cuts because of a protracted oil price rout.
It offers cash-starved energy firms a lifeline right when oil prices are back near six-year lows around $40 per barrel because of global oversupply. Of the 37 US oil and gas producers tracked by Reuters that hold credit lines backed by their reserves, 15 had credit reduced, seven saw an increase and 12 saw no change. Two said they expected to keep their credit unchanged and one said it expected a reduction.
In total, the producers retained access to $30.7 billion in credit this fall, $1.4 billion less than in the spring. "Is anyone looking to ring the death knell for the energy industry?" asked Thomas Rinaldi, institutional investor service director at global energy consultancy Wood Mackenzie. "I don't think so."
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