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Haynes and Boone, LLP Borrowing Base Redeterminations Survey: Fall 2021 October 2021
Haynes and Boone, LLPBorrowing Base Redeterminations Survey: Fall 2021
October 2021
OBJECTIVE OF THE SURVEYHaynes and Boone, LLP has conducted 14 borrowing base redetermination surveys since April 2015,including our most recent survey in September 2021.
The 84 survey respondents include executives at:
Oil and gas producers
Financial institutions
Private equity firms
Professional services firms
The primary objective of this survey is to provide a forward-looking and clear idea of what lenders,borrowers (oil and gas producers) and others are experiencing regarding borrowing baseredeterminations in light of the price uncertainty in the commodity markets.
The following is a summary of our September 2021 borrowing base redetermination survey results andan analysis of the responses.
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Question 1: Which of these best describes you?
3
0
5
10
15
20
25
30
35
40
O&G lender O&G producer - borrower Professional servicesfirm
Other
# O
F R
ES
PO
ND
EN
TS
84 respondents
38% 40%
18%
4%
Question 2: What percentage do you expect borrowing bases to change in fall 2021 as compared to spring 2021?
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# O
F R
ES
PO
ND
EN
TS
0
5
10
15
20
25
30
35
40
45
40% orgreater
decrease
30%decrease
20%decrease
10%decrease
Nochange
10%increase
20%increase
30%increase
40% orgreater
increase
Sentiment for borrowing bases in fall 2021 is solidly positive, with most respondents expecting 10% to 20% increases and almost no respondents expecting decreases.
Overall responses
Lender responses
Borrower responses
Question 3:On average, what percentage of anticipated future production have reserve-based credit facility borrowers hedged for the next 12 months?
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The trend of higher hedging levels has continued into fall 2021, though recent spikes in oil and gas prices mean that for many producers these hedges are more of a burden than a benefit.
0
5
10
15
20
25
30
10% 20% 30% 40% 50% 60% 70% 80% 90% orgreater
Overall responses
Lender responses
Borrower responses
# O
F R
ES
PO
ND
EN
TS
Question 4: Where are producers planning to source capital from in the next 12 months?*
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Debt from Banks
Debt from Capital Markets
Cash Flow from Operations
Debt from Alternative Capital Providers
Equity from Capital Markets
$
58%
Joint Ventures with Private Equity Firms
(farmouts, Drillcos, etc.)
Equity from Private Family Offices
Monetization Transactions
(VPPs, ORIs, etc.)
Equity from Private Equity Firms
*Respondents could select more than one option. We collected 284 responses. The figures in the chart above indicate the percent of total responses for each option.
25%
4%
10%
17%
10%
9%7%
9%
1%8%
Other
Question 5: When will the public equity markets reopen for upstream oil and gas company issuers?
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32%
19%
11% 7%
31%Q1 or Q2 2022
Q3 or Q4 2022
2023
After 2023 Q4 2021
KEY TAKEAWAYS – Borrowing Base Redeterminations Survey: Fall 2021
After difficult borrowing base redetermination seasons in 2020, producers should expect the fall2021 redetermination season to result in materially improved RBLcredit availability.
Last spring, the NYMEX Strip was around $60/bbl. The strip has increased 25% as of October 15,2021. Notably, lenders are more bullish on borrowing bases increasing than producers. While 38%of producers anticipate no change, 62% of lenders predict at least a 10% increase in BorrowingBases.
The recent increases in hedging levels are a source of concern. Although many producers saw theselocked-in hedges as a lifesaver in the down markets of 2020, they now see them as an impedimentto cashing in on the price spike days seen in the second half of 2021.
As with the spring 2021 survey, producers are expected to use cash flow from operations andaccessing bank debt as their primary sources of capital in 2021. The most notable change in marketsentiment is a slight increase in banks as a potential capital source and a slight decrease inalternativecapital providers.
Survey respondents expect 2022 to be a big year for upstream oil and gas companies when itcomes to the public equity markets. Nearly two-thirds of respondents expect the public equitymarkets, which producers havelargely been shut out of since 2018, to be available in 2022.
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HAYNES BOONE ENERGY REPORTS
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Haynes Boone’s oil and gas lawyers have been helping clientsmake the right connections and navigate the ever-changinglegal maze to successfully close deals. Take advantage of ourother reports, surveys and publications on our Energy Rounduppage that help keep you one step ahead:
Haynes Boone and EnerCom Oil & Gas ESG Tracker: ourreport that monitors how oil and gas companies areresponding to the growing demand that they advance anddevelop ESG policies and communicate them to investors,lenders, regulators and other stakeholders.
Energy Bank Price Deck Survey: a compilation and analysisof oil and gas price decks from leading energy banks thatserves as an indication of price expectations used todetermine producers’ borrowing bases under reserve-basedloans.
Midstream Report: includes details on midstreamcompanies that have filed for bankruptcy since 2015.
Oil Patch Bankruptcy Monitor: includes details on oil andgas producers that have filed for bankruptcy since 2015.
Oilfield Services Bankruptcy Tracker: includes details onoilfield services companies that have filed for bankruptcysince 2015.
Contact Hal Means at [email protected] toreceive our latest reports, alerts and surveys, and invitations toour energy-related events.
PRIMARY CONTACTS
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BUDDY CLARKPartner, [email protected]
BRADLEY RICHARDSPartner, [email protected]
KIM MAIAssociate, [email protected]
VIKKI MARSHAssociate, [email protected]
CHRIS REAGENAssociate, [email protected]
PHIL LOOKADOOPartner, Washington, [email protected]
KRAIG GRAHMANNPartner, [email protected]
AUSTIN ELAMPartner, [email protected]
ELLEN CONLEYAssociate, [email protected]
NEAL KAMINSKYPartner, [email protected]
SCOTT HELBINGPartner, [email protected]
JEFF NICHOLSPartner, [email protected]
MIKE FREEMANPartner, [email protected]
TIM JOHNSTONPartner, [email protected]
JIM MARKUSPartner, [email protected]
CAMIE CARLOCKAssociate, [email protected]
REEM ABDELRAZIKAssociate, [email protected]
MICHAEL COOPERCounsel, [email protected]
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