For independent oil and gas companies looking to finance their operations, one lending option is reserve-based lending (RBL), in which the loan amount depends on the value of their oil and gas reserves. Unlike other underwriting processes, the company’s cash flow is not what determines the amount that is available to borrow. Instead, the value of the reserves—referred to as the “borrowing base”—is what decides the loan amount. The lender will re-evaluate the reserve value (the borrowing base) on a regular basis, typically twice a year, to ensure that the loan amount does not exceed the value of the asset.
Over the last few years, industry fluctuations have accelerated a major shift in the way many companies manage their land functions. The days of mega in-house land departments have given way to a leaner approach to land management. Energy companies of all sizes are weighing financial considerations, market uncertainty, and staffing challenges as they re-imagine how they get business done.
We have been an outsourced land partner for large energy companies, small management teams and everything in between for decades. In this article, we will help you identify if land outsourcing is right for your company or team and what you should look for in a land partner.
By Randy Nichols, CPL
Originally published in AAPL Landman Magazine March/April 2022 Edition
The US oil and gas industry remains in limbo as oil demand is soft and the world economy struggles to recover from the effects of COVID-19. As a result, capital expenditures for drilling new wells are at an all-time low. On the other hand, the renewable energy industry is experiencing a large influx of capital, primarily for utility-scale solar and battery storage.