The significant factors in oil and gas loan evaluation have been shifting in recent years. Although reserve analyses and their associated production rates remain basic to an analysis, the economic factors of pricing may frequently involve a greater sensitivity to loan safety than reservoir interpretation.

This paper comments on these changes and on the problems of political risk. A plea is made for realistic evaluations and a recognition that problem credits hurt the borrowing institutions as well as the lenders.

Keywords:
evaluation, coverage ratio, engineer, consideration, upstream oil & gas, cash flow, pricing, bank lending spe number 11100, oil company, political risk
Subjects:
Asset and Portfolio Management
Copyright 1982, Society of Petroleum Engineers of AIME
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