Just a few years ago, when oil prices were $100 a barrel, banks were lining up to give international oil explorers access to billions of dollars to finance projects. Now the money is drying up, as oil prices stay mired in a prolonged funk.
Oil Explorers Face Challenge to Secure Financing as Oil Prices Fall
But as oil prices stay mired in a funk, the money is drying up.
Senior executives from companies such as Tullow Oil TUWOY PLC and Cairn Energy CRNCY PLC have been meeting with their bankers for a biannual review of the loans that allow them to keep drilling and building out projects.
For many European companies, it has been a nail-biting experience, as banks worry about the growing pile of debt taken on by oil companies with little or no profits. Several companies said they expect their ability to tap credit lines to be diminished after the reviews.
Some lenders have brought in teams that specialize in corporate restructuring to scrutinize companies’ balance sheets, spending and assets, though not at Tullow or Cairn, a person familiar with the matter said. In the past, the reviews were generally conducted solely by banks’ energy specialists.