Sinking oil prices are turning distressed U.S. energy companies into takeover targets for opportunistic private investors who are prepared to offer expensive debt in return for ownership stakes, as the sector struggles to access traditional forms of bank financing, Reuters reported. A slowing global economy and fears of excess oil supply sent the benchmark crude oil index spiraling to as low as US$53 in October from a 14-year high of $86 earlier that month. Brent Crude was $58.18 yesterday. High operating costs have also reduced oil and gas companies’ margins and free cash flow, which is restricting access to loan financing as banks’ credit committees are wary of increasing their exposure to the volatile sector. “Oil and gas needs other sources of capital because traditional providers are less interested,” according to Reid Morrison, a partner and global energy advisor at financial services firm PwC. “But these other sources, like private equity, come at higher terms.” Read more.
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