Member Article

As we continue our series of articles relating to distressed commodity prices in the oil and gas market, we expound on the option to monetize assets that are not included in the calculation of your borrowing base. This topic was briefly discussed in our article, “A Dozen Ways to Stretch Your Borrowing Base.”

Under reserve based loans (“RBLs”), producing reserves have always been what one may call the “belle of the ball.” However, in this current commodity price environment producers may be looking to new belles to step onto the dance floor and help them through this ‘lower-for-longer’ dance marathon. A producer’s borrowing base is tied solely to the future value of its proved reserves. No direct credit is given to any other assets owned by the producer. The monetization of non-reserve assets may give companies creative ways to fill the funding gap by providing additional cash flow or serving as collateral for additional loans.

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