Regional Banks in the U.S. Seize Market Share in Oil and Gas Investing Amid Shift in Lending Logic
Regional banks across the U.S. are seizing the opportunity in the oil and gas investing space as larger commercial banks retreat, creating a shift in the lending landscape. The exodus of top European banks due to climate concerns has paved the way for regional banks to step in and grab market share.
According to Jeff Treadway, senior vice president of energy finance at Comerica Bank, the commercial banking sector has seen a significant reduction in active energy lenders, shrinking from over 60 to about 35 in the past decade. This trend has been driven by factors such as consolidation, ESG pressure, and capital discipline angst.
Marc Graham, managing director and head of energy at Texas Capital, highlighted that big U.S. money center banks are focusing on high-grading their portfolios with a preference for publicly listed companies that offer capital markets opportunities. This has created an opening for regional banks to become more active in the oil and gas sector.
In the aftermath of COVID, regional and smaller banks, including new entrants, have filled the gap left by larger banks. Bryan Chapman, market president for energy lending at First Horizon Bank, noted a shift towards a more conservative capital structure among upstream companies, emphasizing the importance of low debt for leverage in negotiations.
Marisol Salazar, senior vice president and manager for energy financial services at BOK Financial, highlighted that the majority of E&P lenders are open for business, with millions of dollars in payoffs resulting from consolidation. She emphasized the importance of developing relationships with new players in the lending space to attract capital.
Despite climate concerns, regional lenders are seeing an opportunity to increase their market share in the oil and gas sector. Salazar mentioned that BOK Financial continues to focus on oil and gas, taking advantage of banks that have reduced their exposure to the industry due to ESG concerns.
Overall, regional banks are stepping up to fill the void left by larger commercial banks in the oil and gas investing space, presenting new opportunities for disciplined borrowers and contributing to the growth of the industry.
