Helping America Navigate a New Energy Reality

OPEC Monthly Oil Market Report August 2016

By on 22 Aug 2016 in news, notable posts

OPECchart/(peakoilbarrel.com) When oil fell below $30 a barrel earlier this year, banks turned away from lending to energy companies. The price of crude has bounced back more than 80% from its February low, but banks are still wary.

Big banks cut loans to the energy sector by about 3% in the second quarter over all and some individual lenders pulled back much more, according to an analysis of July and August securities filings by Barclays analysts.
Moreover, there is increased regulatory scrutiny of energy-sector lending and exposures at banks.

At large U.S. banks…, a median 42% of energy loans were considered criticized in the second quarter, Barclays said. This means they are at higher risk of default.

Bankers and their advisers say a tougher regulatory stance is playing a role: The Office of the Comptroller of the Currency in March published an updated manual for energy lending. While the OCC said in a statement that the “handbook imposes no new restrictions on oil and gas lending,” banks say this has effectively established stricter guidelines for such loans.
Banks have said the new manual has led them to classify more exploration-and-production borrowers as higher risk, or criticized. Using one key measure in the handbook, 91% of a sample of independent exploration and production companies would merit a criticized rating in 2016, according to an analysis of such companies’ financials by law-firm Haynes and Boone LLP.
Over all, large banks cut loans to exploration and production companies about 8% in the second quarter, Barclays said.

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