Typically this involves a non-recourse loan the amount of which is based on the expected present value of future production from the fields in question, taking account of factors such as the level of reserves, expected oil price; a discount rate; assumptions for operational expenditure; capital expenditure; tax and any price hedging employed.
SMBC group is an active lead arranger and participant in reserves-based lending throughout the EMEA region, and indeed, worldwide. The Bank maintains an experienced team of professionals in London including an in-house reservoir engineer. Notable RBL deals in which SMBC group has played a key role include TransGlobe Energy, Salamander Energy, Coastal Energy and CIECO Energy (UK).
The Bank is also able to provide commodity hedging solutions to its hydrocarbons clients through sister company SMBC Capital Markets, Inc
Reserves based lending (RBL), also known as ‘borrowing base’ financing, in the context of oil and gas is a commonly used technique for financing assets which are already in production or where production is expected to commence shortly.