Around 66 percent of Wells Fargo’s credit lines to energy exploration and production companies have been reduced as a result of the two-year drop in oil prices, The Street reported.
The E&P loans make up more than half of the San Francisco-based bank’s US$17.8 billion in loans to oil and gas ventures. Just under half of the outstanding loans have been vetted so far, according to a presentation by CFO John Shrewsberry on Tuesday.
Major American banks that have offered credit lines to oil and gas companies have seen their stock prices drop as investors become nervous that the debtors would default from price pressures. Not a mad thought as the debt to EBITDA ratio of many distressed U.S. oil drillers is topping 7.0
Shrewsberry said Wells Fargo’s total oil and gas portfolio, including credit lines that have not been used yet, equals US$40.7 billion dollars. Less than a quarter of the serviced borrowers were from investment grade companies, the CFO added.
Full article: Wells Fargo Reduces 66% of Credit Lines to Oil and Gas Players (OilPrice)