A recent survey shows that energy lenders have increased their oil price decks significantly in the second half of the year while holding their gas price decks steady. This is according to Macquarie Tristone's “Quarterly Energy Lender Price Survey” of 32 participating regional, US national and international banks that engage in reserve-based lending.

For 2013, the fourth-quarter survey indicates a mean base-case West Texas Intermediate (WTI) oil price forecast of $78.63 per barrel and a mean base-case Henry Hub gas price forecast of $3.21 per million Btu. The survey of Brent-based oil shows a mean base case of $76.63.

The five-year trend shows a decreasing forward price deck for oil and an increasing forward price deck for gas, with average 2017 oil and gas price forecasts of $76 per barrel for WTI, $75.70 for Brent and $3.97 per million Btu.

Modest escalation of both oil and gas prices after 2017 is common, but prices are capped at means of $76.04 per barrel, $75.62 and $4.63 per million Btu for WTI, Brent and Henry Hub, respectively. The average discount rate used by participating banks is 9%, unchanged from last quarter's average.

Operating costs on average are escalated 0.7% per year for WTI, 1.8% for Brent and 0.7% for Henry Hub.

The firm compared the average base case against Nymex futures pricing as of Oct. 15, 2013, for oil and gas separately. When compared with Nymex futures pricing, the average base-case results for WTI were 78% of Nymex and for Brent, 76% of Nymex in 2013; the average base-case results for WTI and Brent each increase to 91%, respectively, in 2017.

The average base-case results for gas were 83% of Nymex Henry Hub futures in 2013 and 92% in 2017.

Quarter-to-quarter pricing trends. Compared to last quarter's survey, front-year pricing has increased by 1.7% for oil and by 0.2% for gas. In the later years, forecasts for oil prices in the fifth year increase by 0.9%, and forecasts for gas prices fall by 2.3%.

Sensitivity case results. The third-quarter survey also includes a sensitivity case, which represents the lenders' low or conservative price decks. Of the 32 participating banks, 28 banks provided a sensitivity case, which averaged a 21% discount to base-case lending policies for oil and a 20% discount for gas over the five-year strip. Three banks provided a sensitivity case for Brent, which averages a 19% discount to the base-case pricing over the five-year strip.

—Andrea Yuen

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