WEST UNION, W.Va. — Greg Sutton smirked when asked if he and the large oil and natural gas companies are in the same dire financial straits.
“Yeah, right,” was his two-word reply.
At first the question may seem an outlandish comparison. However, while some riggers are looking at nearly a year without work and six months without an unemployment check, oil and natural gas companies — once the darling of Wall Street and big banks — are now hat in hand asking for loan modifications.
Oil and natural gas companies are in such a financial quagmire that the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. — the big three police in the world of banking — are telling financial institutions that a significant number of loans they issued to these companies are substandard.
What does that mean to people like Sutton? More than one thinks. A substandard designation means regulators doubt a borrower’s ability to replay a loan, or questions the value of the asset that backs the loan.
This usually limits a bank’s ability to extend more credit to the oil and natural gas companies. And in an industry where it costs about $10 million to drill a well, access to credit is paramount.
That translates into the fact that Sutton and his fellow riggers will not be returning to the oil fields anytime soon…