Smaller energy companies might be forced to explore acquisition options instead of Gulf oil thanks to a new bank lending environment that puts smaller operators at a disadvantage.
It's taken more than a year for banks to start lending money again to energy companies since the BP oil spill, but it won't be BP or Shell taking the hit from more stringent lending requirements that spawned from the major macondo well blowout.
According to a report from The Times-Picayune, the financing of energy exploration since the spill has shifted to favor larger oil companies, the big players, while smaller energy companies are having a harder time getting loans and are now considered a riskier financial venture.
That trend could mean a major shift in the industry, the T-P reports, leaving smaller operators more vulnerable to having to sell. And these factors are only heightened by the consolidation fever in the banking industry, which means fewer banks for smaller oil companies to turn to:
Bryan Chapman, executive vice president and energy lending manager at IberiaBank, said while banks are back in energy lending, small companies will have a hard time. "Banks are definitely being more selective. It puts a bias against some of the smaller companies," Chapman said. "It's really putting the smaller players at a distinct competitive disadvantage."
Bret West, executive vice president of the energy service and equipment group at Wells Fargo, said that big companies like Shell and Anadarko will be less willing to partner with smaller companies for deepwater energy exploration in the future, because it's riskier business after the Macondo well disaster.
"They're looking for companies that have good training, good track records, good equipment, and good balance sheets. All of that to me means that the big get bigger," West said. "When you look into the deepwater, it's not for the faint of heart. I think that the small independents can't survive in the deepwater."
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