Credit crisis in oil

U.S. oil and gas investors are likely to have a harder time borrowing from banks in the coming months because of lower commodity prices and tighter credit conditions, according to a survey by law firm Haynes and Boone LLP. About three-quarters of respondents in a March survey expected their debt capacity to remain flat or decrease by at least 10 percent in the spring. In a previous survey in October, about half of respondents expected their borrowing base to increase by as much as 20 percent. The 96 respondents in the survey include producers, oilfield service companies, finance firms and professional services firms. Banks assess the value of companies’ oil and gas assets each spring and fall and then decide whether to increase or decrease their credit limits. The process is known as borrowing base redetermination. The latest figures are an indication of “greater pessimism” in the industry stemming from the recent banking turmoil as well as the decline in commodity prices, according to Kraig Grahmann, head of Haynes Boone’s Energy Transactions Practice.