However, despite expectations, actual overall reductions were not as drastic as feared. According to one study, companies that experienced reductions saw an average drop of approximately 19 percent, but approximately 50 percent of companies had their borrowing bases reaffirmed or even increased.2 Similarly, other studies found that many companies were able to maintain their borrowing bases at prior levels. Another study of 25 companies by Jefferies found that aggregate borrowing base capacity fell by only 2 percent,3 and a further review by Reuters found that recent redeterminations lowered lending by only approximately 4 percent, with the total credit available reduced by $1.4 billion.4
Analyses of the fall redeterminations generally attribute the lack of widespread reductions to lenders wanting to preserve their market reputation and avoid reductions that could imperil borrowers, along with measures taken by producers, including acquiring assets to increase proved reserves, proving up reserves and relying on hedging programs that locked in higher prices.
Even with many upstream companies weathering the past two rounds of redeterminations, similarly ominous predictions are likely for spring 2016 as prices continue to languish and producers see the value of their developed reserves slip along, with undeveloped reserves falling off their books.
1 http://static.macquarie.com/dafiles/Internet/mgl/com/macquarietristone/publications/energy-lender-price-survey/2015Q4.pdf?v=3; http://static.macquarie.com/dafiles/Internet/mgl/com/macquarietristone/publications/energy-lender-price-survey/2014Q4.pdf?v=4.
2 http://us.practicallaw.com/w-000-7741?q=reserve+based+lending#a000019
3 http://www.ogj.com/articles/2015/10/jefferies-reserve-based-lending-redeterminations-surprising-gentle.html
4 http://www.reuters.com/article/usa-oil-lending-idUSL1N13B1VQ20151117#KBz1LGiojpwBvHgC.97
