U.S. OIL & GAS M&A
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.
According to Thomson Reuters Deals Intelligence, there have been 29 U.S. oil and gas equity deals so far this year that raised $13.9 billion, the highest volumes for that period in 15 years.
Banks typically reassess loans in October and April, and some have started to trim the value of reserves tied to credit lines by $10 to $20 a barrel from the mid-$70s.
That is expected to marginally reduce loans a bit in the sector, but not as much as initially feared.
Some of the demand for new issues stems from the notion among investors that companies can survive with oil around where it is now, in the mid-$40s, and do better if prices recover.
"People view these companies as important. They are needed for the oil and gas supply situation, they are competitive assets and they are going to produce and earn a margin at mid-cycle," said Robert Santangelo, co-head of equity capital markets origination in the Americas at Credit Suisse.
A slew of takeovers are expected in the U.S. oil industry, though so far there have not been many deals as buyers and sellers cannot agree on valuations because of volatile oil prices.
"M&A will follow, M&A tends to take a little bit longer," said Osmar Abib, global head of oil and gas investment banking at Credit Suisse.
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NPD - Preliminary production figures for May 2018 show an average daily production of 1 629 000 barrels of oil, NGL and condensate, which is a decrease of 236 000 barrels per day compared to April.
PLATTS - Libyan crude production has fallen around 400,000 b/d -- or nearly halved -- due to militia attacks on the eastern oil terminals of Ras Lanuf and Es Sider, the head of the country?s National Oil Corp. said Tuesday.
PLATTS - Venezuela's crude output averaged 1.36 million b/d in May, down from 1.41 million b/d in April, and 1.9 million b/d in May 2017, according to S&P Global Platts. The International Energy Agency said it could fall to 800,000 b/d or even lower next year.
PLATTS - Nigerian oil has been slow to sell this month as bidders for the country's July-loading heavy and light sweet crudes have been absent from the market. Market participants pegged the amount of unsold Nigerian barrels loading in July at 20 million-34 million barrels, amounting to roughly 40%-75% of what is produced in a month.