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Every six months, energy companies negotiate their credit limits
with banks, based on the value of their oil and gas reserves.
Chesapeake, the No.2 U.S. natural gas producer, said on Monday
that the next review of its borrowing base had been postponed
until June 2017.
The company's shares rose more than 6 percent in premarket
trading.
Oil prices have dropped more than 60 percent from their peaks in
June 2014, hitting the profits of most companies in the
industry.
Chesapeake has managed to retain its borrowing limit at a time
when most oil and gas producers are bracing for steep cuts to
their credit lines.
Just a few weeks into the current round of talks, over a dozen
companies have had their loan limits cut by a total of $3.5
billion, or a fifth of available credit, according to data
compiled by Reuters. (http://tmsnrt.rs/1S9304F)
At that rate, $10 billion more of bank credit will disappear as
the remaining credit lines of about $50 billion come under
scrutiny in talks that stretch into May.
Banks are also relaxing covenants that could have allowed lower
classes of lenders to throw borrowers into default and suddenly
trigger repayment requirements.
Chesapeake said two of its covenants had been relaxed under the
latest agreement.
The company's shares were trading at $4 before the bell.
Up to Friday's close, the stock had lost nearly three-quarters
of its value since the beginning of June 2015.
(Reporting by Anya George Tharakan in Bengaluru; Editing by
Kirti Pandey)
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