WILLISTON, N.D. — Oasis Petroleum Inc said on Wednesday it has asked its bondholders to restrict its ability to take on second-lien debt, a step designed to help it maintain access to an existing credit line during the downturn in crude oil prices.
As part of the request, Oasis said it would cap its secured borrowing base at $1.53 billion, which should assuage fears the company is becoming too levered.
Banks had cut the Houston-based company’s credit line by 10 percent earlier this month to $1.53 billion, the largest reduction yet this autumn of an oil producer’s access to debt markets.
As of early October, Oasis had only drawn about $155 million on the credit line, and the company wants to continue to be able to access the remainder should it be needed.
The company announced in a press release on Thursday that it is asking bondholders for changes to several provisions of existing loan documents, including adding, deleting or revising parts that generally “restrict Oasis’ ability to incur second-lien indebtedness.”
The press release caused confusion initially, as some paragraphs seemed to indicate the company was actually asking for permission to seek second-lien debt, rather than asking for changes to existing covenants to prevent such a step, according to analysts consulted by Reuters.
Oasis declined to provide a copy of the detailed forms sent to bondholders. Representatives for Wells Fargo, the solicitation agent for Oasis, were not immediately available to comment.
Second-lien debt is secured, albeit on a junior basis, unlike unsecured bonds.
Oasis has given bondholders until Oct. 26 to respond. The company needs bondholders representing a majority of outstanding notes to approve the request.
Low oil prices curtail the oil industry’s cash flow and loans help producers cover any shortfall between cash flow and expenses as they wait for a price recovery. The price of crude has fallen about 50 percent since the summer of 2014.
Oasis, which operates in North Dakota’s Bakken shale formation, is set to report third-quarter results on Nov. 3.
The company’s stock fell 4.1 percent on Wednesday alongside a drop in U.S. crude oil futures.
(Reporting by Ernest Scheyder; Editing by Alan Crosby and Chizu Nomiyama)
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