An Introduction to Legal Documentation Used in Bank Financings For the Oil and Gas Industry

The purpose of this paper is to provide a brief and basic introduction to the legal concepts involved in bank financings for borrowers in the oil and gas industry. No attempt will be made in this paper to provide a detailed analysis of any particular problem which might be encountered in this area of legal practice. Particular attention will, however, be directed toward analyzing the mechanics of the secured borrowing base revolving credit agreement, one of the most flexible bank financing vehicles for a borrower owning developed oil and gas properties which can be used as collateral security, and also toward describing the documents required for such a loan transaction. A pattern form list of such documents is attached to this paper as Exhibit A.

This paper will also focus on the procedures for obtaining and perfecting liens against and security interests in the types of collateral which often secure repayment of loans made to borrowers in the oil and gas industry. The importance of following the correct procedures for perfecting liens against and security interests in collateral is especially evident today in light of the recent bankruptcies which have occurred within the oil and gas industry.

SECURED BORROWING BASE REVOLVING CREDIT AGREEMENT

The secured borrowing base revolving credit agreement provides for the making of loans by a bank to a borrow