Plunge in Oil Prices Causes Junk-Debt Bloodbath for Drillers
- Swift Energy, Penn Virgnia among firms facing potential cuts
- Options to refinance run thin as debt investors bail
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The latest rout in crude prices is coming at about the worst time possible for energy producers that have been relying on credit markets to keep drilling.
That’s because banks that extended credit lines tied to the value of the companies’ oil reserves are preparing to recalculate how much they’re willing to keep lending. With crude prices more than 60 percent below their peak last year, lenders are poised to reduce those lines by 10 percent to 15 percent on average -- a move that could wipe out $15 billion of credit, according to estimates from CreditSights Inc. analyst Brian Gibbons.