The fourth quarter of 2014 saw the price of crude oil drop by more than 50 percent as a combination
of economic and geopolitical factors
converged to wallop prices. The decline
continues. West Texas Intermediate
(WTI), a grade of crude oil used as a
benchmark in oil pricing, closed the
first week of 2015 below $46 per barrel.
While the ripple effects of such a
precipitous drop have yet to be fully
realized, cracks are forming. Russia’s
already reeling from Western sanctions
Falling Oil Prices Give Rise
to Turnaround Prospects
BY MICHAEL M. PARKER, PARTNER &
TIMOTHY S. SPRINGER, ASSOCIATE, FULBRIGHT & JAWORSKI LLP
for its meddling in Ukraine—faces a
banking crisis. The Central Bank of
Russia hiked the interbank trading
rate to 17 percent, which means that
some companies must pay as much
as 30 percent interest to borrow. 1
The spike in rates has pummeled
the ruble in currency markets,
leading pundits to project a growing
number of bankruptcies in Russia
and among its trading partners.
Domestically, a potential wave of
workouts stateside looms as the hedge
positions of oil and gas operators
begin to expire (and falter) at the start
of the second quarter this year.
Turnaround professionals cannot
help but see a silver lining. This
article provides insight into a few
problem areas associated with oil and
gas workouts and bankruptcies.
Reserves Based Lending
Reserves based lending (RBL) is also
known as “borrowing base” financing.
In the context of oil and gas properties,
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