Current Trends in Oil and Gas Financing
Reports in the newspapers and long lines at the gasoline pumps serve as constant reminders that the modern world is in need of additional reserves of oil and gas. The acquisition of, exploration for, and development of new oil and gas properties, and the processing and transportation of production therefrom, are paramount public and private concerns. As the costs connected with these activities are great, the need for adequate and appropriate financing is ever important.
Financing for oil and gas enterprises has historically been available from a variety of sources, most of which are well known. It would appear that these enterprises, both large and small, are providing a larger part of their capital needs by borrowing from commercial banks. This kind of capital has many advantages and is available through a variety of financing techniques, most of which in one way or another relate to an enterprise's presently existing and anticipated mineral reserves. This type of financing is often categorized as reserves oriented financing.
Reserves oriented financing by commercial banks is by no means new, but there have been some interesting developments in recent years and months in the traditional patterns. Borrowing objectives change, and as lawyers are almost invariably consulted by both borrowers and lenders in the design and effectuation of lending transactions, [
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