American Oil and Gas Reporter - September 2015 - 55

What Associated Bank likes to see in
an application is that an operator is not
spending just to keep production up, Brendel states. "That usually is not a problem.
People really have been reining in their
spending," he observes. "Sometimes the
worst thing you can do is drill a really good
proved, undeveloped prospect. We want
to see borrowers have a plan."
That philosophy seems to fly in the face
of conventional thinking that investors value reserves, and that if a producer is not
drilling, it is not replacing reserves. Brendel differs. "I hope Wall Street has become
sophisticated enough to understand that destroying capital on uneconomical drilling
just to keep production level does not make
sense," he expresses.
Brendel credits other lenders and investors for supporting independent producers. "Just as producers have been prudent
in their drilling, they also have been good
about securing other sources of financing,"
he comments. "That is one of the good
things about this cycle: There is capital available for quality assets from many channels."
Capital Availability
That thought is echoed by Shane Louder, Midland market manager for Community National Bank in Midland. "One of the

important differences this time is the
amount of capital available," he says. "In
previous down cycles, all the capital went
out of the market. That has not happened this
time. The majority of companies with
good proposals have been successful in placing bonds and equity, despite the downturn."

"Our existing customers' borrowing
bases stayed flat, for the most part,"
Louder says. "Some people thought they
could pick up some production inexpensively, but there has not been a lot of acquisition and divestiture activity yet. The
discounts some people anticipated have not

"We are old-school energy bankers who do not get too far out
of the box. We like guys with good assets and good hedges."
SHANE LOUDER
Louder says he views the industry as
in a holding pattern. "I am not saying there
isn't more pruning to be done, but our independents did a good job of trimming
when the price of oil dropped," he reports.
"They are not yet into expansion mode, so
we can't call it a recovery, but they definitely are holding the line."
Most of the operators to whom CNB
lends have acreage held by production, so
Louder says they largely were able to reduce capital expenditures and sit tight to
ride it out. He notes that while it took a bit
of time to wind down some ambitious developments, that time was less than what
he observed in previous down cycles.

materialized."
On the prospecting side, Louder says
his group is both replying to inquiries and
making calls. "There certainly are some
companies that we would like to bank, and
there are some firms that are drilling
still, but that is very limited. We very much
are trying to find additional business," he
reveals.
He says CNB likes producers with
long-lived, proved-developed-producing
assets. "We are old-school energy bankers
who do not get too far out of the box, and
at times like these, that is good," Louder
says. "We like guys with good assets and
good hedges."
❒

SEPTEMBER 2015 55



American Oil and Gas Reporter - September 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2015

Contents
American Oil and Gas Reporter - September 2015 - Cover1
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American Oil and Gas Reporter - September 2015 - Cover3
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