Nearly three-quarters of oil and gas CFOs polled in a recent survey said they expect the U.S. economic crisis to impact their ability to borrow money or extend bank debt in 2009. In addition, well over half the 100 executives surveyed by the accounting firm BDO Seidman LLP in October and November said that credit capacity restraints, including access to capital, will be their greatest challenge next year, followed by falling oil or natural gas prices. "They feel gravely concerned about raising money," said Charles Dewhurst, a partner at the firm and leader of its national energy practice in Houston.

Dewhurst says the credit drain may lead more companies to consider buyouts or bankruptcy as a solution. "With less credit and lower prices, smaller E&P [exploration and production] companies are going to be attractive acquisition targets for larger companies, and because of debt constraints, many are going to feel compelled to sell," he said. 

Companies that put together projects and borrowed money based on $150 barrel oil will be most vulnerable. "I've heard from clients and others that more conservatively managed companies used a lower price," he said. "Those companies that were aggressive in borrowing to the max are going to have constraints and will have to make substantial payments to the banks."

Nearly 60% of the CFOs surveyed did think that growth in the oil and gas industry will be fueled next year by global or domestic demand for energy, despite the falloff this fall. Says Dewhurst: "If we were to see a resurgence in global and domestic demand, that might nip in the bud any M&A activity." - Claire Poole

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