Introduction

There are four main types of Project Financings that are common in the Petroleum Industry and these are:

  • Type I - The Oil and Gas Production Loan

  • Type II - The Carved Out Production Payment Financing

  • Type III - Project Financings Backed By A Guaranty of Completion, and

  • Type IV - Project Financings Backed By A Continuing Undertaking Such As A Throughput Agreement.

In this paper, I shall describe each of these four Types and present a separate Case for each type in order to illustrate the concept involved. The Cases used in this paper shall be confined to domestic financings, but the concepts described could also be adopted to international financings as well.

TYPE I

The Oil and Gas Production Loan is a loan to an independent operator or another type of loan to a company or individual that is based solely on the collateral of reserves of oil or gas in the ground. In Table A, I have constructed a projection that could be applicable to properties owned by an independent operator and in the next section of this paper, I have constructed a hypothetical Financial paper, I have constructed a hypothetical Financial Plan covering a loan to that operator. Plan covering a loan to that operator.

FINANCIAL PLAN FOR CASE I

March 31, 1979

Financing For An Independent Operator (An Oil And Gas Production Loan)

Proposed 4 1/2 Year Oil And Gas Proposed 4 1/2 Year Oil And Gas Production Loan To Production Loan To INDEPENDENT OPERATING COMPANY

Amount: $16,000,000 (to be taken down on June 30, 1979)

Purpose: To refinance existing debts and for Purpose: To refinance existing debts and for acquisition of additional leases.

Amortization: Effective with runs as of July 1, 1979,30% of Gross Income from the Property(Property) evaluated by Independent Petroleum Engineering Consultants as of July 1, 1979 (Report) shall be applied on a monthly basis against the Loan through December 31, 1979 and thereafter 50% of Gross Income shall be applied against the Loan. All amounts applied against the Loan shall go first to interest and then to principal.

In the event that the outstanding balance on the Loan on the dates indicated below shall exceed the Maximum Balance (Maximum Balance), then the Independent Operating Company(operator) shall make an Additional Payment (Additional Payment) in an amount sufficient to reduce the outstanding balance below the Maximum Balance.

(000's Omitted) Maximum Dates Balance

December 31, 1979 $15,500 March 31, 1980 14,500 June 30, 1980 13,500 September 30, 1980 12,750 December 31, 1980 11,750

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