American Oil and Gas Reporter - September 2015 - 54

Kennedy calculates that across the industry, independents were spending 120
percent of cash flow on development
prior to the decline in oil prices. Now, that
average is down to 70 percent.
"People are borrowing for two reasons," Kennedy reports. "Either they are
seeking to make acquisitions at good
prices and consolidating properties or
operations, or they are trying to maximize
their production by funding workovers.
But whatever they are doing, they are staying within cash flow."

uations. We have worked our way through
spring and summer redeterminations, and
those producers that needed additional capital to shore up their operations were mostly able to secure it."
Associated Bank is headquartered in
Wisconsin, but Brendel is based in Houston. He says it started lending to the energy sector in 2011, but has $1.1 billion
in commitments to the oil and gas sector.
All of it is upstream, reserve-based borrowing, and comprises 4 percent of the
loan book for the parent institution. The

"The idea has been to live to fight another day. This is not the
first rodeo for most of our customers, so they have an idea
about what they have to do."
TIM BRENDEL
Fight Another Day
"The feeling around the industry is certainly one of near-term uncertainty," assesses Tim Brendel, senior vice president
and oil and gas segment leader at Associated Bank. "Producers were starting to feel
like things were turning around as oil made
its way back up to $60 a barrel in June, but
the fall back in July and August had companies again reassessing their liquidity sit-

54 THE AMERICAN OIL & GAS REPORTER

bank has about 50 clients in oil and gas.
Brendel expresses some concern for the
fall. "When hedges and production roll off
because of deferred investment in the field,
there may be some additional pain. This just
stresses the importance of addressing liquidity needs," he evaluates. "If oil prices rise
back to the $60 range or higher, most people probably will be OK, but if the price
lingers around $40, there will be more pain."

The goal over the summer, Brendel
stresses, was for producers to get themselves in shape for fall redeterminations.
"We got them through the spring and summer seasons," he says. "There was a lot of
participation by private equity, public
markets, and whatever sources of capital
in whatever form necessary."
There was both a pull from lenders asking borrowers to come in for discussions, and a push from borrowers asking
for assistance, or just guidance, in advance
of any formal redeterminations last spring
and summer, he recalls.
"Most people have been on the same
page," Brendel says. "The idea has been
to live to fight another day. This is not the
first rodeo for most of our customers, so
they have an idea about what they have to
do. We also have in-house engineers
who can provide some insight as well."
He adds that while the traditional timing for redeterminations is semiannually,
that can happen more frequently, if necessary. "If a borrower wants credit for a
drilling program that has increased its borrowing base, we would be willing to
look at that as often as quarterly," Brendel says. "That is one of the beautiful
things about this industry: There are so
many levers to pull. It also is a very resilient industry."

American Oil and Gas Reporter - September 2015

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