Energy industry

Banks lending against the oil and natural gas reserves of hundreds of independent U.S. drilling companies have pulled back from the sector at an unprecedented rate this year after oil and gas prices slumped.

Bankers had asserted in April that they could handle a slump in oil prices tied to the coronavirus pandemic. Continued volatility, combined with declining collateral values and a rise in bankruptcies for exploration companies, is denting their confidence.

Weak demand for oil and gas, brought on by the economic fallout of the coronavirus outbreak, has raised concerns of energy firms missing loan payments or even going bankrupt. Here’s how banks and regulators are trying to get ahead of potential problems.

Laredo Petroleum Inc. and Oasis Petroleum Inc. are among at least six producers whose ability to secure short-term loans against their oil and natural gas reserves have dropped by 10% or more.

The bank gained $45 million in PACE financings, which let homeowners pay back the costs of efficiency projects over time.

The rating agency has developed rating criteria for bonds backed by oil and gas royalties, though such deals would be capped at the 'A' rating category.

Property Assessed Clean Energy loans can no longer be offered in unincorporated areas of Kern County, Calif. The controversial loans, meant to promote energy efficiency, began in California and are now offered in a number of states.