Billionaire George Kaiser’s bank goes deeper into the oil field

Across the United States and around the world, banks have reduced their lending to the US oil and gas sector. BOK Financial Corp.

BOKF 1.09%

Doubled.

The Tulsa, Okla-based bank holding company. for Bank of Albuquerque, Bank of Oklahoma and Bank of Texas, as well as other financial services companies, is majority owned by billionaire oilman George Kaiser. It has snatched market share from major European banks and local rivals who have pulled out of the industry even as oil prices have risen from historic lows to near-historic highs in less than two years.

“We’re showing that we can be very aggressive,” BOK CEO Stacy Kymes said. “Some have struggled to underwrite and manage credit risk.”

The outlook for energy companies today is much better than during the depths of the pandemic, when an oil glut drove prices down, drivers stayed home and airlines grounded flights.

The request has returned. Oil is now in short supply, a dynamic made worse by international sanctions against Russian oil following the Russian invasion of Ukraine. Oil prices surged to multi-year highs around $100 a barrel, as did the outlook for energy providers, which now have more access to capital from investors and other industry lenders.

The BOK was bookrunner on $2 billion in loans to US oil and gas companies in the first quarter of this year, accounting for 6.7% of loans in the sector, according to data provider Refinitiv. The bank ranked fifth overall, behind domestic giants Wells Fargo & Co.,

Bank of America Corp.,

Citigroup Inc..

and JPMorgan Chase & Co.

BOK Financial chairman George Kaiser owns a nearly 56% share of the lender.


Photo:

Mike Simons/Associated Press

During the first quarter, the lender’s energy loan balances increased by $191 million to $3.2 billion. Energy loans represent around 15% of the bank’s total portfolio.

The lender added 19 new borrowers in the quarter as others pulled out of the energy sector as they tried to limit their exposure to carbon-producing industries, Mr Kymes said during a briefing. conference call with analysts on Wednesday.

This year’s lending builds on last year’s, when the BOK was 11th in oil and gas lending. Its market share of 2.8% was the highest ever recorded by the bank.

The bank’s surge in the rankings came as global energy loans fell, despite a rebound in oil prices.

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According to Refinitiv. Companies raised $219.9 billion by selling bonds last year, down 30% from 2020.

This year, high oil prices have boosted cash flow for energy companies, so they don’t need to borrow as much to run their businesses. Many US producers have said they have no plans to increase production, even with high oil prices, which limits their need for capital.

Banks have also reduced oil and gas loans to reduce their exposure to greenhouse gas-emitting industries. Companies such as HSBC Holdings PLC,

Barclays PLC and Bank of Montreal said they were reducing exposure to the energy sector as part of broader climate change goals.

Other lenders were discouraged by an extremely volatile oil market that made it difficult for them to assess risk.

Prices for US benchmark West Texas Intermediate crude fell more than 50% between 2014 and 2015, first turned negative in 2020 at the start of the pandemic, then jumped again over $100 a barrel this year after Russia invaded Ukraine.

The volatility has caused longtime lenders such as San Antonio-based Cullen/Frost Bankers Inc.

reduce loan portfolios and reduce shareholders’ exposure to the oil market.

“We’re a bank, and banks aren’t usually that volatile,” said Bill Day, a Cullen/Frost spokesman. “When investors buy a bank, they don’t think they’re buying energy.”

Many US oil producers have said they have no plans to increase production, even with high oil prices. An oil rig in Midland, Texas.


Photo:

Jordan Vonderhaar/Bloomberg News

Cullen/Frost, whose Texas roots date back to the 1890s, is trying to reduce energy loans to about 5% of its total loan portfolio. These loans accounted for 6.6% of the bank’s portfolio at the end of last year, up from 8.2% in 2020. In 2015, around 16% of all its loans were to oil and gas companies, it said. the bank.

“There’s less capital available for washing in the industry,” said Buddy Clark, a Houston-based partner in the energy practice of Haynes and Boone LLP.

Although rising oil prices have allowed banks to increase the size of the credit lines they offer to energy companies, which are backed by the value of oil reserves, banks are setting tighter limits on the amount of how much debt companies can bear and how they can use their borrowings, he said.

“If you don’t have a bunch of banks competing with each other to get the last loan deal, that means the banks selling capital can make a tougher deal,” he said.

For the BOK, oil and gas remain central. Mr. Kaiser, chairman of the board, bought the company in 1990 in receivership from the Federal Deposit Insurance Corp. The Tulsa, Okla., billionaire now owns a nearly 56% stake.

Mr. Kaiser made his fortune in the oil and gas industry and owns Kaiser-Francis Oil Co. Earlier this year, he boosted his net worth by publicly listing Excelerate Energy Inc., a company that manufactures liquefied natural gas floating. terminals.

Mr. Kaiser’s commitment to the industry, however, did not help stock prices in the short term. BOK shares are down about 20% so far this year. The company reported first-quarter net profit $55 million lower than a year earlier, as profits were weighed down by the bank’s mortgage servicing and securities trading business, hurt by higher interest rate.

Write to Vipal Monga at [email protected]

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