BNP Pulls Plug On US Energy Sector, Will Exit RBL Lending

Thursday, February 11, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
02/11/2016

Back in 2012, BNP Paribas exited the North American reserve-based lending market, when it sold its RBL unit to Wells in an effort to shore up its balance sheet amid the turmoil generated by the eurozone debt crisis.

A little over two years later, in the fall of 2014, BNP got back into the RBL game in the US. That probably wasn’t a good idea.

Just a few months after the bank jumped back in, the Saudis moved to bankrupt the US shale complex and it’s been all downhill from there with crude plunging and America’s cash flow negative producers careening towards insolvency.

We’ve been warning since early last year that it was just a matter of time before banks start to shrink the borrowing bases of uneconomic producers’ credit facilities. In other words, with the door to the HY market now slammed shut as spreads blow out and investors panic, the last lifeline for many in the O&G space is about to be cut, as no bank wants to be caught flat-footed if things get as bad as many people think they will.

On Thursday, we learn that BNP is now set to exit the RBL market for the second time in five years.

“BNP Paribas is reining back lending to the US energy sector, potentially tightening a squeeze for cash-strapped producers struggling with the collapse in oil prices,” FT reports. “The Paris-based bank is pulling out of the business of reserve-based lending, a vital source of liquidity for many oil and gas companies with big capital needs and irregular cash flows.”

The Rest…HERE

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