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ARP vs. Traditional Reserve-Based Lending
Reserve-based lending (RBL), frequently used in the oil and gas industry, is a type of asset-based lending — the asset being oil and gas. While both reserve-based lending and ARP considers factors like the price of oil and gas, the amount of oil and gas remaining in the ground, and extraction expenditures - an ARP will never reassess the value of your financing. All of these factors enable us to properly understand the value of your asset and fund you accordingly. This allows you to get more money based on your oil and gas producing assets faster, rather than having to apply for a standard reserve-based loan. Contact a member of the Advance Royalty Company today to learn more about smarter alternatives to reserve-based lending.
There are numerous benefits that our clients see from our reserve-based lending alternative solution. Some of the benefits of ARP include but are not limited to:
There are many reasons to choose our reserve-based lending alternatives at the Advance Royalty Company. Keep reading below to learn more about how it works and contact an ARP professional today.
How It Works
Let’s say you have a new deal in mind but don’t currently have the funding to make it happen. Rather than going through the lending process with a traditional financial institution, we suggest speaking with a representative at Advance Royalty Company. With ARC, you will always have access to capital, allowing you to accelerate the growth of your portfolio.
ARC makes complex financial transactions possible with a strong background in O&G deal structuring. We are available to walk you through structuring a deal that traditional sources of financing may not consider.
We get it — trying to expand an oil and gas enterprise has its share of challenges. That’s why it’s important to have an experienced, transparent representative by your side who understands the ins and outs of the industry. Rest assured that the ARC team will be with you every step of the way, reviewing your options and answering any questions you may have.
With a traditional reserve-based loan, funding is typically only approved for those with existing producing assets with $20 million in annual revenue. With the Advance Royalty Company, our reserve-based loan alternative lending solution allows you to qualify with as little as $10 thousand monthly revenue from your existing oil and gas assets — making it significantly less difficult to finance your next project
The timeline for our alternative to reserve-based loans are all performed in house and we can have a proposal developed in as little as 10 days. Other more traditional reserve-based lenders generally take a minimum of 90 days, often more, to do their due diligence. They have significantly more challenges and legal red tape to overcome before they can extend you an offer. We all know that oil and gas assets move quickly. By the time your reserve-based loan process finishes, the opportunity may be lost.
Traditional reserve-based lending structures generally only offer you up to 30% of the actual value of the asset you are interested in acquiring. At the Advance Royalty Program, our reserve-based lending alternative solutions allow you to take advantage of the potential future production. The ARP program takes into account up to 100% of the projected value of your oil and gas producing asset, allowing you to get capital you need to do things right.
With traditional reserve-based financing, covenants on credit agreement will require the asset owner to hedge their production through the credit provider. This allows the financial institution to increase their profit margins through selling hedges. With ARP by Advance Royalty Company, it can be thought of as selling a small portion of your future production to finance your project. This removes the risk factor during the term of your transaction.
With both types of lending, your interest is an expense that can be written off. However, with reserve-based lending, that right off remains the same regardless of the pricing landscape of commodities. With our reserve-based lending alternative, if commodity prices increase, you can write off additional interest expenses on your taxes.
In many instances of reserve-based lending, the terms will require the entirety of the entity's assets as collateral for financing. With ARP by the Advance Royalty Company, we require the producing asset to be used as collateral. However, this does not encumber any other assets you or your enterprise may possess.
Here at Advance Royalty Company, we believe that clients should be able to access their capital whenever they want. It’s time to see what the ARC team can do for you! Contact us today to learn more about our ARP™ program.