Petrofac renews revolving credit facilities on almost same terms

Petrofac successfully extended and amended a syndicated revolving five-year credit facility.

The size of the funding facility was maintained by lenders at $1.2bn and would run to 2020, with the oil explorer being granted the option to extend it twice, for an additional year each time – if its creditors consent.

“The lending group remains substantially the same as that which participated in the original 2012 financing,” the company said in a statement.

Tim Weller,chief financial officer, commented: "We have taken the opportunity to extend the facility given the favourable market conditions, which has resulted in lower margins and commitment fees as well as a number of improvements to the terms and conditions. We are very pleased to extend the agreement with our existing bank group and welcome the new banks into the relationship."

The facility is available for general corporate purposes.

The news comes as many observers are watching to see how successfully, or not, the oil industry is able to refinance what are known as “bank revolvers” in the wake of the recent sharp drop in oil prices.

In May ratings agency Moody’s estimated that default rates for exploration and production companies would increase from 3% in March to 7% in 2016.

Most oil companies sell their production on the basis of the previous year’s prices, giving them some wiggle room to accommodate oil price declines. Yet if the price falls are sustained that can result in increased financial costs.

It is fairly ordinary for revolving credit facilities to be renewed every six months.