Survival Mode -- August 6, 2015

Explorers in need of cash are selling oil fields as last resort.

Energy explorers reeling from the rout in oil prices are looking for liquidity in an obvious place: their rocks. Having exhausted other ways to raise cash as a glut of global supply depresses prices, a slew of producers from Anadarko Petroleum Corp. to Comstock Resources Inc. announced more than $2.4 billion in asset sales last month, according to data compiled by Bloomberg.

Selling oil and gas fields to pay off lenders and fund new drilling -- often a wildcatter’s option of last resort -- is surging after a six-month lull.

There’s more to come -- by one estimate, another $20 billion this year -- as executives at Occidental Petroleum Corp., Whiting Petroleum Corp., Penn Virginia Corp., Exco Resources Inc., Chesapeake Energy Corp. and Ultra Petroleum Corp. have all said in recent weeks that they are selling assets or exploring sales.

The surge shows how the industry’s two-pronged strategy for staying financially healthy since oil prices started tanking -- raising capital while tightening belts -- may not be enough, particularly for companies with a lot of outstanding debt. Bank regulators are getting nervous about the industry’s exposure to drillers, creating another incentive to sell assets.

“For the most part, lending banks have worked with their clients to provide temporary relief,” said Ron Gajdica, co-head of energy acquisitions and divestitures investment banking with Citigroup Inc. “That relief can’t go on forever.”

See my comments about Jay Gould at this post earlier today.