“Wells Fargo trimming energy borrowing bases an average 15 percent, lender says”
A Wells Fargo energy lender says the bank has trimmed oil-company borrowing bases by an average 15 percent so far, after working through about a third of its financial arrangements with petroleum firms.
Wells Fargo, the nation’s fourth-largest bank, is reevaluating its 250 financial deals with oil producers in a semi-annual review of the credit lines it extended to producers when crude prices were higher. The financial sector is widely expected this fall to rein in revolving corporate loans that are based on the value of oil properties, which have tanked alongside crude prices since the previous spring review.
“In our tougher deals, we’re seeing a 30 to 40 percent drop and the better deals are flat to maybe even a little bit up,” said Rich Gould, head of energy credit and risk management at Wells Fargo during a panel hosted by Thompson & Knight in Houston on Thursday. “The smaller guys are obviously a bit capital constrained. Liquidity under their revolvers have diminished significantly. Directionally we would expect to see borrowing bases come down.”