Path Forward: Borrowing Base Redeterminations In A Restructuring World

 

Opportune LLP Managing Director David Morris has his finger on the pulse of the oil and gas industry, which makes him uniquely qualified to assess the shifts in the industry as a response to the uncertainty surrounding the COVID-19 pandemic and its ripple effects on commodity price volatility, forcing many companies to file for bankruptcy or enter into restructuring arrangements.

Regarding the wave of bankruptcies in the industry this year, Morris says it boils down to a convergence of a variety of negative factors, some of which began before the pandemic.

“When I reflect upon it, the first things that come to mind for me are too much debt, too little hedging, price shocks, and demand depression and destruction. Those are certainly four factors that have been at play this year,” Morris says. “We knew going into this year that there were a lot of E&P companies that still had too much debt.”

The combination of too much debt and too little hedging, combined with the onset of the pandemic, which Morris says added insult to industry, resulted in a perfect storm for financial distress.

There’s also been a contraction in the number of lenders operating in the reserve-based lending, or RBL, space, a trend that Morris believes will continue unless there’s a drastic shift in the direction of the oil and gas industry.

Among those banks still committed to RBLs, Morris says there’s a movement for higher holds. In general, Morris also believes that banks will be more conservative in lending for quite a while, though he stops short of forecasting a permanent change brought on by the current downturn.

Follow us on social media for the latest updates in B2B!

Twitter – @MarketScale
Facebook – facebook.com/marketscale
LinkedIn – linkedin.com/company/marketscale

Follow us on social media for the latest updates in B2B!

Latest

Can Fitness Be More Accessible?
How Technology Can Make Fitness More Accessible
October 20, 2021
  Key Points: Fitness members want an easy tool to use on their mobile device to manage classes, memberships, in-gym daycare and other fitness services provided by gyms. Customers of Daxko Read more
Helping Restaurants of All Sizes with the Restaurant Repair Process
Helping Restaurants of All Sizes with the Restaurant Repair Process
October 20, 2021
  Running a restaurant is hard work especially if you are a small business. There are a lot of tasks that go into day-to-day operations that can all be derailed if the wrong piece of equipment Read more
EP 26: VRF Systems Provide Flexible Heating & Cooling Options: 10 Minutes To A Better Building
October 20, 2021
On this episode of 10 Minutes To A Better Building, Host Tyler Kern talked with Jason Lawrence, Ductless Technical Specialist at Boland Trane, which provides HVAC solutions and a network of more than Read more