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Editorial Dept

Editorial Dept

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Mixed Messages On Supply Glut Leaves Bears Unsure

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Banks trim lending to oil and gas

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- Banks review their credit lines to oil and gas companies twice a year – in the autumn and spring – and make adjustments depending on the oil price and how much oil a company can produce. Lower oil prices, all things equal, lead to a reduction in credit for an oil driller.
- Lenders were more lenient than expected last year, keeping the credit lines open to struggling drillers. Much of that has to do with the fact that lenders still want to be paid back, so shutting off the taps and pushing a company into bankruptcy can be self-defeating.
- Still, Reuters reports that $3.5 billion in credit has been cut from more than a dozen companies so far this spring. Whiting Petroleum (NYSE: WLL) was the recipient of one of the largest reductions, with its credit line cut more than $1 billion.
- There have been 59 bankruptcies in the U.S. oil and gas sector since the beginning of 2015, a figure that will increase as indebted companies are cut off.
- If the current pace of credit redeterminations continues, the industry could lose access to a combined $10 billion by next month.

2. Equity markets have been generous

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EXXON Mobil -0.35
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