Restructuring of Energy Loans Likely, Experts Say; Companies in the Oil and Gas Industry Can Expect Financing to Dwindle If Prices Remain Low and Banks Continue to Feel Pressure from Regulators over Risky Loans, Banking and Industry Experts Said Thursday. [Derived Headline]

By Conti, David | Tribune-Review/Pittsburgh Tribune-Review, October 29, 2015 | Go to article overview

Restructuring of Energy Loans Likely, Experts Say; Companies in the Oil and Gas Industry Can Expect Financing to Dwindle If Prices Remain Low and Banks Continue to Feel Pressure from Regulators over Risky Loans, Banking and Industry Experts Said Thursday. [Derived Headline]


Conti, David, Tribune-Review/Pittsburgh Tribune-Review


Companies in the oil and gas industry can expect financing to dwindle if prices remain low and banks continue to feel pressure from regulators over risky loans, banking and industry experts said Thursday.

"The energy loan market is heading into a tightening phase," said Bruce Shearer, a senior vice president at Huntington Bank who spoke about the industry's financing challenges during an energy summit at PNC Park.

His comments, echoed by other speakers, underscore evidence that shale companies are taking more aggressive steps to weather the turmoil in their industry as prices hit three-year lows.

Some of the biggest natural gas producers have slowed or stopped drilling. Leaders at Range Resources Corp. and Consol Energy Inc. spoke in the past week about efforts to sell non-core holdings, and both companies were among those that wrote down the value of hundreds of millions of dollars worth of underperforming assets this year.

However, lenders familiar with the cyclical nature of energy markets have been hesitant to foreclose on companies and more likely to negotiate new terms on loans, banking and industry experts said.

"A bank doesn't want to run a coal, oil or gas company," said Robert Simons, a lawyer with Reed Smith who noted that capping wells or mines can become a huge financial and environmental liability. "Shutting them down is just not realistic."

That hesitancy might help explain why American oil and gas production has withstood the price drop, said former U.S. Steel CEO John Surma, keynote speaker at the summit organized by the Turnaround Management Association's Pittsburgh chapter. Lenders have been "more supportive than in previous cycles," allowing companies to keep pumping oil and gas into an oversupplied market, he said.

How long the leniency lasts -- and how "stressful" a tighter lending market becomes for energy companies -- will depend on how low prices go and for how long, he said.

"Lower for longer seems to me like where were are going," Surma said. …

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Restructuring of Energy Loans Likely, Experts Say; Companies in the Oil and Gas Industry Can Expect Financing to Dwindle If Prices Remain Low and Banks Continue to Feel Pressure from Regulators over Risky Loans, Banking and Industry Experts Said Thursday. [Derived Headline]
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