“Energy lenders cautious as oil prices continue slide”
Bankers doing business in Houston are keeping a watchful eye on energy-related loans as oil prices continue to slump. While several interviewed cited cautious lending practices that expect price fluctuations, they agreed that lower prices for longer periods could have a ripple effect that ultimately curtails lending.
Bob Shearer, Houston-based partner with law firm Thompson & Knight, said just as petrochemical plants and refiners benefit from lower crude prices, banks might benefit as well.
“The longer-term effects may actually be beneficial for Texas financial institutions,” he said.
During the past five to 10 years, he said, energy companies have had options among competing sources of capital, such as private equity, high-yield bond financing and commercial lenders not based in oil and gas regions. But as crude prices fall, Shearer said, a lot of these newcomers will likely pull back on their oil and gas lending, giving Houston banks an opportunity to fill the void.
But overall, he said, lower prices could be bad news for Houston as much of the city’s growth is driven by energy.
“As the price of crude falls … that will have a ripple effect through the economy,” he said.