“Oil Co. Bankruptcies Could Prime Deal-Making Pump”
However, fewer companies may be able to ride things out when lenders soon revise the borrowing bases for so-called reserve-based loans, a staple of energy industry lending that are based on a company’s total reserves and the price of oil and are revised twice a year.
“These lenders may start forcing some sales, and we’ll see better assets come online,” said Hunter White, who co-chairs Thompson & Knight LLP’s energy industry group.
Also, hedges against oil price drops may not outlast the slump in prices. According to recent reports from the U.S. Energy Information Administration, 60 percent of the nation‘s crude oil storage capacity is being used — up from 48 percent a year ago — yet drilling productivity continues to increase. If producers start bumping up against the storage ceiling, some industry watchers say prices could fall even further.
“Once those hedges start to roll off and the companies start to feel more of the pain, I think you’ll see more activity,” White said.