4 Ways Oil and Gas Companies Can Easily Finance their Operations

4 Ways Oil and Gas Companies Can Easily Finance their Operations

In January 2019, the United States crude oil production reached a new record. According to the US Energy Information Administration, the production output rose 90,000 bpd from last December. Increasing the production output isn’t the only challenge faced by oil and gas companies.

For most companies, finding the right financing to operate is one of the biggest hurdles to overcome. Yet, the oil industry has a wide range of financing options.

Not sure what we’re talking about? We’ll tell you about some financing options that may help you take your oil company to the next level. Keep reading for your petroleum industry financing guide.

Operating Oil and Gas Companies: Funding Options to Strive in the Oil Industry

While consumers keep looking for ways to lower their energy consumption. You might be searching for options to increase your production output and take your oil company to the next level. Hiring a company such as Brodie International can provide the field support and maintenance you need to improve your operations.

Yet, these services come with a hefty price tag. Your company may not have enough capital available to bring these companies onboard. Yet, that shouldn’t stop you from making it happen.

You may consider requesting funding for these projects. Don’t know what your options are? Here are 4 ways to secure the financing you need to take your oil company to the next level.

1. Bank Loans

Taking a bank loan is the easiest way to secure a lump sum to finance your operations. Your terms, rates and processing time may vary on a lender basis. It’s recommended that you contact potential lenders to learn more about your loan options.

2. Line of Credit

This type of funding may take longer for approval than an oil and gas loan. Yet, it may be your best funding option.

When you get a line of credit, you will have revolving credit available to meet your on-going business needs. Your lender may ask for collateral to secure your line of credit.

3. Reserve Based Lending

This type of lending is a reserve based loan that you secure by providing your oil and gas field or portfolio as collateral. Your loan amount will depend on your oil and gas reserves. This loan requires repayment by using the proceeds from sales in your portfolio or field.

4. Private Placement

Another option you may consider is issuing securities to investors or companies to raise capital. Private placements don’t follow the same regulatory requirements as a typical Initial Public Offering.

If you decide to issue a private placement, your stocks won’t be available for purchase in the public market. You may issue your securities to an accredited investor, small group of investors or entity.

The Bottom Line

Finding the best financing options stops most oil and gas companies from achieving their business goals. Yet, that shouldn’t stop you from improving your operations and taking your oil company to the next level. It’s important to consider all your financing options from bank loans to reserve based lending.

Ask yourself what option provides the funding you need and the best rates. While a line of credit may be your best option to fund your operations, reserve based lending might be your best bet to increase your production output. You must choose the financing that can take your company to the top of the petroleum industry.

Now that you know the basics about finding the right financing for any oil company. Want to learn more ways to fund your company? Check out our Finance section to read more interesting articles.

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