Bad Loans to Outnumber the Good for American Oil Producers | Alternative Energy | Forums

wonder if there will be a bailout

Bad loans are likely to outnumber good ones soon in the U.S. oil patch, an indication of the pressure on energy companies and their lenders from the crash in prices.

The number of energy loans labeled as “classified,” or in danger of default, is on course to extend above 50% this year at several major banks, including Wells Fargo & Co. andComerica Inc., according to bankers and others in the industry.

In response, several major banks are reducing their exposure to the energy sector by attempting to sell off souring loans, declining to renew them or clamping down on the ability of oil and gas companies to tap credit lines for cash, according to more than a dozen bankers, lawyers and others familiar with the plans.

The pullback is curtailing the flow of money to companies struggling to survive a prolonged stretch of low prices, likely quickening the path to bankruptcy for some firms.

Fifty-one North American oil-and-gas producers have already filed for bankruptcy since the start of 2015, cases totaling $17.4 billion in cumulative debt, according to law firm Haynes and Boone LLP. That trails the number from September 2008 to December 2009 during the global financial crisis, when there were 62 filings, but is expected to grow: About 175 companies are at high risk of not being able to meet loan covenants, according to Deloitte LLP.

“This has the makings of a gigantic funding crisis” for energy companies, said William Snyder, head of Deloitte’s U.S. restructuring unit. If oil prices, which closed at $39.79 a barrel Wednesday, remain at around $40 a barrel this year, “that’s fairly catastrophic.”

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