Banks across the U.S. and around the world have cut lending to the U.S. oil and gas sector. BOK Financial Corp.
The banking holding company Bank of Albuquerque, Bank of Oklahoma and Bank of Texas, based in Tulsa, Akla, along with other financial services companies, is majority owned by billionaire oilman George Kaiser. It took market share from major European banks and local competitors that withdrew from the industry, even as oil prices jumped from historic lows to near-highs in less than two years.
“We are showing that we can be very aggressive,” said Stacy Cimes, BOK’s chief executive. “Some have struggled with underwriting and credit risk management.”
Prospects for energy companies today are much better than in the midst of the pandemic, when oil oversaturation lowered prices, drivers stayed at home and airlines stopped flights.
Demand is back. Oil is now in short supply, the dynamics have worsened international sanctions against Russian oil after Russia’s invasion of Ukraine. Oil prices have jumped, reaching multi-year highs of about $ 100 a barrel, as well as prospects for energy suppliers who now have more access to capital from investors and other lenders in the sector.
According to data provider Refinitiv, BOK was the bookkeeper for loans to US oil and gas companies in the first quarter of this year for $ 2 billion, or 6.7% of loans in the sector. The bank took fifth place overall, losing to national giants Wells Fargo & Co.,
Bank of America Corp.,
and JPMorgan Chase & Co.
In the first quarter, the balance of the creditor for energy resources increased by $ 191 million and amounted to $ 3.2 billion. Energy loans account for about 15% of the bank’s total balance sheet.
The lender added 19 new borrowers during the quarter as others dropped out of the energy sector because they were trying to limit their impact on the carbon industry, Mr Qimes said during an interview with analysts on Wednesday.
This year’s lending is based on last year’s, when BOK was 11th on oil and gas loans. Its market share of 2.8% was the highest in the bank’s history.
The increase in the bank’s standings was due to the fact that total energy lending decreased, despite the rebound in oil prices.
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Last year’s $ 143.7 billion in oil and gas loans were the third lowest total in 10 years, higher than in 2020 alone, when the pandemic began, and in 2016, after oil prices fell from the 2014 high. to Refinitive. Last year, the company raised $ 219.9 billion through bond sales, up 30% from 2020.
This year, high oil prices have increased the cash flow of energy companies, so they do not need to take so many loans to do business. Many U.S. producers have said they do not intend to increase production, even at high oil prices, which limits their need for capital.
Banks are also cutting oil and gas lending to reduce the impact on industries that emit greenhouse gases. Firms such as HSBC Holdings PLC,
Barclays PLC and the Bank of Montreal have said they are reducing the impact of the energy sector as part of broader climate change goals.
Other creditors were deterred by the extremely volatile oil market, making it difficult for them to assess risks.
US benchmark prices for West Texas Intermediate fell more than 50% between 2014 and 2015, first negative in 2020 at the start of the pandemic, and then again jumped more than $ 100 a barrel this year after Russia’s invasion of Ukraine .
Instability has caused long-standing creditors such as Cullen / Frost Bankers Inc..
reduce credit books and reduce shareholder influence in the oil market.
“We’re a bank, and banks aren’t usually that volatile,” said Bill Day, a spokesman for Cullen / Frost. “When investors buy a bank, they don’t think they’re buying energy.”
Cullen / Frost, whose Texas roots date back to the 1890s, is trying to cut energy loans to about 5% of the total credit book. At the end of last year, these loans accounted for 6.6% of the bank’s balance sheet compared to 8.2% in 2020. In 2015, about 16% of all loans fell to oil and gas companies, the bank said.
“There’s less capital available to wash around the industry,” said Buddy Clark, a Houston partner in the Haynes and Boone LLP energy practice.
Although rising oil prices have allowed banks to increase the size of credit lines they offer to energy companies backed by oil stocks, banks are tightening limits on how much debt companies can have and how they can use their loans. . , he said.
“If you don’t have a lot of banks competing with each other to get the latest loan transaction, that means banks selling capital can make a tougher deal,” he said.
For BOK, oil and gas remain central. Mr. Kaiser, chairman of the board, bought the firm in 1990 because of a verdict in the Federal Deposit Insurance Corporation. The billionaire from Tulsa, Aklara, now owns nearly 56% of the shares.
Mr. Kaiser has made his fortune in the oil and gas industry and owns Kaiser-Francis Oil Co. Earlier this year, it increased its net worth by publicly listing Excelerate Energy Inc., a company that manufactures floating liquefied natural gas terminals.
However, Mr. Kaiser’s commitment to the industry has not contributed to rising stock prices in the short term. This year, BOK shares have fallen by about 20%. The company said first-quarter net income was $ 55 million lower than a year earlier as profits were hampered by the bank’s mortgage and securities trading business, which was hit by rising interest rates.
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