U.S. oil and fuel producers anticipate their borrowing skill to extend over the subsequent few months, leaving them open to put money into new shale property, significantly the Eagle Ford in Texas.
That’s the conclusion of Haynes & Boone LLP, which discovered that greater than 80% of respondents predict their borrowing bases, or credit score availability backed by collateral, will doubtless enhance as banks conduct their biannual opinions. That might profit the Eagle Ford and Austin Chalk because the “subsequent huge play,” the research mentioned.
The Eagle Ford is already a longtime shale play, producing about 12% of U.S. oil, nevertheless it’s been receiving extra consideration of late. While the formation produces solely a couple of third as a lot crude because the Permian basin, the nation’s most prolific subject, the Eagle Ford is nearer to the Gulf Coast’s community of refineries and pipelines, and drilling rights are cheaper.
In March, Steve Chazen, former Occidental Petroleum Corp. CEO, purchased drilling rights within the Eagle Ford and Austin Chalk from EnerVest Ltd. in a deal price $2.66 billion. KKR & Co. and Venado Oil & Gas LLC additionally expanded their place within the play with a $765 million buy of Cabot Oil & Gas Corp. property that month.
EOG Resources Inc. is the largest producer of crude from the Eagle Ford at the moment. Production from the play, although, stays beneath its 2015 peak, based on the Energy Information Administration, probably creating a possibility for brand spanking new entrants.
With West Texas Intermediate, the U.S. crude benchmark, up 28% up to now six months, pressures have been easing on debt-loaded oil producers. They’ve used that to lock in costs. About 50% to 60% of their 2018 manufacturing has been hedged, the survey indicated.
Producers will use money movement from operations, financial institution debt and personal fairness as their foremost sources of capital this 12 months, the survey mentioned. Bankruptcies “are displaying a dropoff,” it mentioned.
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