For oil and gas producers seeking loans, there are two more banks in Texas that can help. One, Texas Capital Bank, is a relatively new face in the crowd. The other, FleetBoston Financial, is a long-time player that is opening its first Houston office. Texas Capital Bank established its energy-lending group in March of this year, and it has a tight focus, says Terry McCarter, its executive vice president. The group concentrates on reserve-based independents, with small to midsize market capitalizations and typically managed by their owners. The loan size is up to $10 million. "We felt there was a huge vacuum in regard to that group," McCarter says. "You are truly working with those customers because they typically don't have a full-time chief financial officer. You're working with them almost as a partner." The Dallas-based bank is not offering derivative products. However, it does offer guidance with outsourcing. For example, some smaller companies may not realize all of their options when it comes to marketing oil and natural gas, but bank executives can direct them to third-party sources for help. Texas Capital Bank specializes in senior debt, which a lot of its customers are attracted to because it helps them retain ownership of their company and their assets. If senior debt is not enough to satisfy a customer's needs, the bank can bring in other partners. While the pace of large acquisitions has slowed due to commodity prices, smaller sales-from $500,000 to $5 million-are still pretty numerous, McCarter says. Also, many companies are using senior debt to recapitalize their balance sheet. So far, Texas Capital Bank has established relationships with about 25 companies since it formed its energy-lending group. "We've been very, very surprised," McCarter says. "We underestimated the market. We were not prepared for the volume of transactions that came in." A Boston-based commercial bank, Fleet opened its Houston office this month, headed by Jim McBride, who was vice president of producer finance at Enron North America. Fleet is no stranger in the oil patch: it has a $6- to $7 billion exposure to the sector, and 40 energy clients in Texas alone. The Houston presence will allow the bank to follow energy more closely, McBride says. "We're very bullish on the industry right now." To meet the projected demand growth in the North American natural gas market, McBride thinks the industry will need to invest $30 billion a year in exploration and production and $10 billion a year on midstream assets. Fleet is open to doing one-off transactions, and the "sweet spot" is $25 million and up, McBride said. Early on, Fleet focused on acquisition and exploitation deals, but many of today's opportunities are in structured financing-monetizing reserves by committing them today to sell at a forward, set price, he says. The company gets capital today for production tomorrow. McBride says a definite trend in the banking industry is to become more like intermediaries rather than simply sources of money. The focus is delivering the market, not just delivering the balance sheet. Certain clients like the way things are changing, but others don't, he says. -Jodi Wetuski