Grant Thornton’s 8th annual Survey of Upstream US Energy Companies includes a review of 2009 authored by Partner Loretta Cross. Cross described 2009 as ‘a year of significant challenges and transitions’ with prices down over 70% from the 2008 high and with many companies taking steps to restructure their financial obligations. An absence of buyers made disposals virtually impossible. Hedge positions became critical and banker price decks were higher at times than the traded commodity price. Chapter 11 filings were rife in E&P and renewable. Out-of-court solutions employed debt-for-debt and debt-for-equity exchanges to restructure their balance sheets and obtain relief from creditors.
Today, there are signs of a return to normalcy. In September and October alone, energy issuers were able to access over $14 billion in unsecured corporate debt in the public markets. It is expected that the energy bond market will continue to grow through the second quarter of 2010 as companies take advantage of continued access to the capital markets to alleviate near-term pressures and upgrade balance sheets. Oil and gas reserve and property acquisitions have picked up steam. Joint venture and ‘asset monetization’ transactions are back. In summary, the exploration and production industry appears to have survived a short, deep down cycle and is now looking attractive for the capital markets at least as compared with the rest of the US economy (everything is relative!). More from gt.com.