ralfy - "Also, additional credit was provided based on the assumption that the industry will recover and thrive in the long term..." Not these days: the banks and other money lenders just got bushwhacked a couple of years ago for doing just that during the boom. The credit used to be issued on such foolish optimism. If you look at the post C11 settlement details the bankers have their asses we'll covered now. Take Halcon as a good example. The new big credit line is ASSET BASED. IOW it's based on the current value of its PROVEN RESERVES based on the CURRENT PRICE of oil/NG. Remember: the bankruptcy court gave those creditors 96% of Halcon's assets. And I suspect the bank's engineers were very conservative in their evaluation. An evaluation that Halcon had no choice but accept. Additionally the bankruptcy court GUARANTEED those new loans: if anything goes wrong in the future those loans get paid off before any other debt or obligation. And if I recall correctly the creditors also get a $266 million payment...again GUARANTEED by the federal bankruptcy court.
This is typically how the dynamic has always worked. During the boom times there's a lot of competition amongst the money lenders, investors and service companies. As a result they have very little to no leverage and thus truly sh*tty trades are made. But the situation completely reverses during a bust: the E&P companies ended up with the sh*tty terms because they've lost all leverage. On top of that the federal bankruptcy court will guarantee compliance with the new trade terms. Remember the court gave the Ocean Rig creditors 99%+ of its assets: a fleet of state of the art Deep Water drill ships. Without many drilling contracts they aren't generating much revenue today. But they still have a replacement cost into the $BILLIONS. And given the creditor's ownership is in the form of stock they can easily liquidate anytime they chose. And by controlling the board of directors they can set policies that would enhance the value of the stock even if it isn't in the best long term interest of the company.
But have no doubt: the money lenders took a hard hit by making foolish loans during the boom. But the shoe is on the other foot now and they have the federal bankruptcy court forcing the companies into bad deals to the benefit of the money lenders. IOW now is when the banks can be very aggressive lending money to the oil patch. But when oil was $100/bbl? Not such a good idea. LOL.