Corporate Debt Review

Corporate Debt Review: Q1 2017

Q3 saw strong recovery for natural gas prices, which successfully played catch-up from the commodity’s relative underperformance vs. oil in Q2. Oil-focused upstream operators treaded water over the period, with the WTI front-month actually slipping 1.4% compared to Q2 prices at an average $44.94/bbl. Meanwhile, mixed and gassy operators saw significant improvements, with natural gas prices surging 24.5% quarter-on-quarter to an average $2.794/MMBtu. The gas dynamic helped the cash flows of many firms, with several Appalachia-focused entities boosting 2016 spending plans by around 10% and US gas leader Chesapeake hiking its budget by 42%. Sensing improving conditions ahead, many oil-focused firms in the Permian and even in some less well-positioned markets also ramped spend—many by around 20%—which tightened instant prospects but gave indication that oil operators were heading toward the black, as well.

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Corporate Debt Review: Q4 2016

The second quarter of 2016 provided a reprieve for operators struggling with the multi-year low oil and gas prices struck in Q1, with WTI average closing prices rebounding nearly $12/bbl (35.5%) sequentially from $33.63 to $45.59, and Henry Hub also bouncing $0.25/MMBtu (12.5%) to an average $2.24. While prices were still a far cry from the lofty heights of the Shale Boom, they comped very well to Q4 of 2015 ($42.06/bbl average WTI and $2.23 Henry Hub), suggesting that the bottom was in and showing both producers and their backers the beginnings of a path forward.

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Corporate Debt Review: Q3 2016

Q1 of 2016 was a challenging quarter for even the best-positioned upstream operator, with WTI imploding 20% from already depressed 4Q15 levels to an average $33.63/barrel, and Henry Hub also down another 11% to an average $1.99/MMBtu. Fortunately, both commodities appear to have bottomed, suggesting brighter days ahead, but the damage has nonetheless been real, resulting in 13 bankruptcy filings by publicly traded E&Ps year-to-date, and with good chances for many more to come according to our modeling. In turn, upstreamers have fought lower prices by tightening their belts and boosting efficiency, cutting capex by an average 48% compared to 2015 spending levels and helping many stave off insolvency.

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Borrowing Base Report: 1H 2016

Spring 2016 Redetermination Season Takeaways Everyone was expecting the Spring 2016 Borrowing Base Redetermination Season (or “SBBRS”) to be painful. WTI and Henry Hub price benchmarks relevant to asset valuation and RBL collateralization were down 47.1% and 40.7% respectively in the wake of the pricing collapse, which commenced in earnest in late 2014 and dragged…

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Corporate Debt Review: Q2 2016

Global oversupply and rising inventories conspired to push down average US oil prices by 15% and natural gas by 18% over the course of Q4 2015. The resulting quarterly prices of $42.15/bbl and $2.23/MMBtu fell solidly below most US breakevens, forcing the upstream oil and gas sector to tighten spending in response. And while those capex cuts have dramatically improved the group’s liquidity picture, they still admittedly have a fair way to go before achieving sustainable spending levels, especially in light of lower cash flows and in some cases substantial debt coverage commitments. Based on company announcements, the cutbacks appear to have continued well into 2016.

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Borrowing Base Report: Q1 2016

The Fall Borrowing Base Redetermination Season (or FBBRS, for short) was ballyhooed by many as a veritable “end to all things” for upstream E&P in the Lower 48. A survey of the industry conducted by a prominent energy capital-focused law firm resulted in forecasts of a near-40% slashing of industry borrowing bases on average during the cycle. But by the time the dust had settled, at least among publicly traded companies the results were much less dramatic. Industry-wide across the Lower 48, based on our analysis of reports from 71 publicly traded and two privately held firms which announced their results, borrowing bases on average were cut just 6%. Oil-focused producers underperformed gas-levered and mixed production firms, down nearly 7% compared to 5% and 5.4%, respectively.

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