Billions of dollars of bad oil
and gas loans: A rebuttal
LARRY DERRETT, HOUSTON, TX
AN AR TICLE TITLED “Billions of dollars of bad oil and gas loans”
recently published by Oil & Gas Financial Journal suggests that
despite the substantial decline in oil prices over the last three
years, banks have delayed write-offs by changing the rules as to
how borrowing bases have been calculated. The article, which
ran in the September issue, goes on to imply the market has been
distorted because there have been so few borrowing base reductions and bankruptcies. At its conclusion, the author poses the
question how long can this shell game last?
Please note this is not intended as an effort to discredit the
author who seems well qualified and has published informative
articles in the past. In addition, if I have gathered conclusions
from the article that were not purposefully intended, I apologize
ahead of time. Regardless, there were certain comments impli-
cating banks which were quite clear. I have a quite different
view and want to address some of these topics.
To start, the assertion that many “borrowing bases were not
reduced” despite the reduction in oil prices over the past four
years is simply not true.
After the mid-year borrowing base season in 2016, 44 out of 63