Despite a 50 percent slide in crude prices since last summer, U.S. shale oil producers are enjoying remarkably easy access to capital markets and this will allow them to avoid getting squeezed when banks reset their loans in April.
A surge in equity issuance so far this year by oil and gas companies has surprised many who in December thought the price drop would hurt the ability of producers to tap capital markets. But investor appetite has held up in the first quarter, amounting to a vote of confidence in the ability of shale oil companies to weather the storm by relying on hedges and slashing spending to show a commitment to capital discipline.
"Because the capital markets are so good companies that are more worried about their borrowing base are able to ... raise either debt or equity, take those proceeds, and reduce their borrowing base," said Timothy Perry, a managing director for energy investment banking at Credit Suisse in Houston.
He said one client had reduced its borrowing base by two-thirds after doing a capital market deal.Maybe the capital markets "know" something the rest of us don't know.
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