As a result of the plunging value of oil and gas reserves, commercial banks are slashing borrowing bases for reserve-based loans and are refusing to lend drillers additional cash.

Amanda Shaw-Castro, who represents banks in oil and gas lending, noted, “Many banks have already had their RBL portfolios on life support for the last two years, at a minimum. We can certainly expect to see more deals like this to come.”

An energy finance attorney, Jonathan Judkowitz added, “Costs can balloon; you never know what you’re actually going to realize from a bankruptcy. It’s having a definitive number so you know exactly what kind of hit you’re going to take in terms of your balance sheet, and to be able to realize losses today and not have to worry about those same losses tomorrow.”

For more insights, view the Law360 article “Banks Eye Energy Loan Sell-Off Amid Oil Downturn” (subscription required).

Meet Amanda

Amanda L. Shaw-Castro focuses her practice on real estate, finance, and energy transactions. Amanda assists a number of national banks with all aspects of energy-based lending, including ongoing due diligence in connection with revolving lines of credit and letter of credit facilities. She also regularly assists private and national banks restructure oil and gas loans with the goal of maximizing recovery.