Considerations Concerning Bank Financing of Oil and Gas Properties
- J.E. Warren (First National City Bank of New York)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- May 1956
- Document Type
- Journal Paper
- 11 - 14
- 1956. Original copyright American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc. Copyright has expired.
- 4.6 Natural Gas
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- 104 since 2007
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Over the years, technological development, expanding markets and competition have kept the petroleum industry dynamic and progressive, fulfilling a vital part in the nation's expanding economy. Looking to the future, indications point to a greater and greater demand for petroleum products to meet the growing needs of a larger population and an increasing per capita dependency upon energy. Expansion of facilities in all branches of the industry will be needed as demand grows. This expansion will increase financial requirements, for there is a continual need of capital to make it all possible. A major share of these capital requirements will be needed to explore for and develop increasing amounts of crude oil and natural gas.
This paper will cover first, the banking concept as it applies to all oil property loans; second, current considerations concerning specific loan situations; and, finally, considerations of future political and economic forces as they are related to oil and gas loans.
Banking Concept Concerning Oil Property Loans
We have all heard in the oil country allegations such as "tight bankers" and "bankers only loan money on cinches". This is a natural human reaction, for all of us accept easily those things that conform to our own thinking and forward our own interests, and reject readily those contrary to our beliefs and interests. The misunderstanding arises because banking and oil producing, by their very natures, must operate in different business climates. Actually, banking and the oil business do not have conflicting objectives, for bankers are anxious to do all they can to build relationships and promote the welfare of their oil clients. They must, however, confine their judgment within limits imposed by their over-all responsibilities. So, perhaps it might be well at this point to compare the two businesses - banking and petroleum - and point out the differences in business climate in which each one is permitted to operate.
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