Energy lenders’ fourth-quarter 2009 outlook for oil prices indicates banks are adjusting forecasts as commodity prices continue to fluctuate, according to a new survey of 42 commercial-capital providers.

Front-year oil prices are just above the $50-per-barrel threshold, as average price expectations rose to $51.29 in this quarter, up from $47.83 in September.

Conversely, the front-month forecast for natural gas prices declined to $3.87 per million Btu, down from $4.06.

The results are according to global energy investment banker and M&A advisor Macquarie Tristone’s quarterly “Energy Lender Price Survey” of regional, national and international reserve-based lenders.

The lenders’ five-year trend shows an increasing forward price deck for both oil and gas, with average 2013 forecasts of $62.58 for oil and $5.77 for gas.

“Modest escalation of both oil and gas prices after 2013 is common, but prices are capped at an average of $62.31 and $5.79, respectively,” the firm reports.

The average discount rate used by participating banks is 8%. Operating costs on average are escalated 0.8% per year for both oil and gas.

Using a 60/40 blended gas/oil weighting, Macquarie Tristone compared the average base case against Nymex futures as of October 26, 2009. The average base-case results were only 70% of Nymex futures in 2009, trending upward to 75% by 2013. This continues a downward trend since early 2009, when results were 88% of Nymex futures.

Quarter-to-quarter trends. Compared with the third-quarter survey, the lenders’ front-year pricing for oil has increased by 7% and for gas has decreased by 5%.

For 2013, forecasts for oil prices are 4% higher, and gas-price expectations hardly budge, decreasing by 1% versus the past-quarter survey.

Since the survey began in second-quarter 2005, the participating banks’ oil and gas price decks have continually increased in the extended years from the previous-quarter results. However, the past four quarters have been an exception. Third-quarter 2008 results showed the first quarter-to-quarter decrease, and first-quarter 2009 results showed a shift from backwardation to contango, as well as a continuing decrease in price decks.

Sensitivity-case results. The fourth-quarter 2009 survey also includes a sensitivity case, which represents the lenders’ low or conservative price decks. Of the 42 participating banks, 35 provided a sensitivity case, which averaged 23% and 20% discounts to base-case lending policies for oil and gas, respectively, over the five-year strip.

The 2009 average sensitivity-case oil price is $40.11, for example, according to Macquarie Tristone’s findings; for gas, $3.21.

Reserve-based lending scenario. Using current assumptions, the base-case price decks from the fourth-quarter 2009 survey were used to calculate a discounted cash flow using PV-8 from the bank average. With a 60% advance rate and 20% upside limitation, the amount loaned to a possible acquirer would be about $80 million.

Using the same assumptions, but using the base-case price decks from fourth-quarter 2008, the amount loaned to a possible acquirer would be about $84 million. The decrease in base-case pricing from fourth-quarter 2008 to fourth-quarter 2009 results in a 5% decrease in advance-rate amounts.

Macquarie Tristone is a global energy advisory firm that provides fully integrated investment banking, acquisitions and divestitures, and global equity-capital markets services. For more information, contact Rob Bilger at 713-651-4222.

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