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Haynes and Boone, LLP has conducted 15 borrowing base redetermination surveys since April2015, including our most recent survey in March 2022.
The 105 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 whatlenders, borrowers (oil and gas producers) and others are experiencing regarding borrowingbase redeterminations in light of the price uncertainty in the commodity markets.
The following is a summary of our March 2022 borrowing base redetermination survey resultsand an analysis of the responses.
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Overview – Haynes Boone Borrowing Base Redeterminations Survey
1. With the backdrop of oil and natural gas prices being at levels not seen in the last ten years,producers are expected to see substantial borrowing base increases this spring.
2. Expectations regarding hedging levels show a decrease for the first time in the last several surveys.This could be a potential indication that producers believe prices will rise even more and are waryof becoming too locked in with respect to their upside potential.
3. While cash flow from operations continues to reign supreme as a capital source, there are severalnotable changes regarding how producers are funding themselves. Use of equity capital, bothpublic and private, and bank debt is increasing. Use of monetization transactions, joint venturesand debt from alternative capital providers—all of which typically have a higher cost of capital—isdecreasing.
4. Respondents report that the most important impediment to increasing oil and gas production isone that will take some time to reverse: Lack of reinvestment in the industry over the last couple ofyears.
5. Despite all of the current focus on ESG, respondents see it as one of the least importantimpediments to increasing oil and gas production.
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Haynes Boone Borrowing Base Redeterminations Survey
Key Takeaways – Spring 2022
Question 1: Which of these best describes you?
4
0
5
10
15
20
25
30
35
40
O&G lender O&G producer -borrower
Professionalservices firm
Oilfield ServicesCompany
Other
# O
F R
ES
PO
ND
EN
TS
105 respondents
36%
32%
21%
1%
10%
Haynes Boone Borrowing Base Redeterminations Survey
5
# 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
There is abundant optimism for spring 2022 borrowing bases, with most respondents expecting double digit percentage increases.
Overall responses
Lender responses
Borrower responses
Question 2: What percentage do you expect borrowing bases to change in spring 2022 as compared to fall 2021?
Haynes Boone Borrowing Base Redeterminations Survey
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Respondents are reporting lower hedging percentages in the spring 2022 survey compared to the last several surveys conducted.
0
5
10
15
20
25
30
35
10% 20% 30% 40% 50% 60% 70% 80% 90% orgreater
Overall responses
Lender responses
Borrower responses
# O
F R
ES
PO
ND
EN
TSQuestion 3: On average, what percentage of anticipated future production have reserve-based credit facility borrowers hedged for the next 12 months?
Haynes Boone Borrowing Base Redeterminations Survey
Question 4: Where are producers planning to source capital from in the next 12 months?*
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Debt from Banks
Equity from Private Equity Firms
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.)
Debt from Capital Markets
*Respondents could select more than one option. We collected 349 responses. The figures in the chart above indicate the percent of total responses for each option.
26%
5%
11%
21%
7%10%9%
5%
1%
Other
5%
Haynes Boone Borrowing Base Redeterminations Survey
Question 5: The tide has turned and US producers are being asked to increase oil and gas production. Rank the most important impediments to increasing production, with 1 as the most important and 6 as the least important:
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0 5 10 15 20 25 30 35
Lack of completion equipment
ESG
Federal regulations
Lack of competent rig crews
Lack of access to capital
Lack of reinvestment in the industry over thelast couple of years
Number of responses
Most Important Impediments
Haynes Boone Borrowing Base Redeterminations Survey
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Haynes and Boone’s oil and gas lawyers have been helping clientsmake the right connections and navigate the ever-changing legalmaze to successfully close deals. Take advantage of our reports,surveys and publications that help keep you one step ahead:
• Haynes and Boone and EnerCom Oil & Gas ESG Tracker: ourreport that monitors how oil and gas companies are respondingto the growing demand that they advance and develop ESGpolicies and communicate them to investors, lenders, regulatorsand other stakeholders.
• Borrowing Base Redeterminations Survey: a forward-lookingsurvey that reveals what lenders, borrowers and others in theindustry expect regarding the borrowing base redeterminationsin light of oil price uncertainty.
• Energy Bank Price Deck Survey: our survey that compiles oiland gas price decks from leading energy banks and serves as anindication of price expectations used to determine producers’borrowing bases under reserve-based loans.
• Midstream Report: includes details on midstream companies thathave filed for bankruptcy since 2015.
• Oil Patch Bankruptcy Monitor: includes details on oil and gasproducers that have filed for bankruptcy since 2015.
• Oilfield Services Bankruptcy Tracker: includes details on oilfieldservices companies that have filed for bankruptcy since 2015.
Contact Hal Means at [email protected] to receive ourlatest reports, alerts, surveys and invitations to our energy-relatedevents.
Haynes Boone Energy Reports
Primary Contacts
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BUDDY CLARKPartner, [email protected]
BRADLEY RICHARDSPartner, [email protected]
KIM MAIPartner, [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]
LAURA MARTONEPartner, New [email protected]
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