Lending to an oil and gas producer requires a fine blend of both credit and technical analyses. The primary asset, and often the only asset is oil and/or gas in the ground. A loan to the producer is dependent on the valuation of these assets. Determination of reserves is necessary, but more often than not, of greater importance is the rate of production of these reserves and the corresponding cash flow. Wells may be capable of producing at rates greater than pipeline capacity or higher than the ability of the economy to absorb the production. With the technical and economic analyses, a thorough financial review is necessary.

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