Very fortunate to be in a position at work where I think I will need some unconventional banking assistance. Essentially I will have the opportunity to personally participate in projects at work that would potentially result in cash calls beyond what I can fund by myself. The return is very good and not an opportunity I want to pass up. Is this the realm of a private banker? Opportunity is in the O&G space. Corporate structure is a bit complex and not yet set in stone, so I would likely need someone who is clever and flexible. Perhaps this is something I should be asking a financial advisor, but I don't have one and am not sure I want to go that route.

I have Chase Private Client but I'm not sure if a megabank is the way to go here. I have never used their services.

Look at Northern Trust. They have an O&G practice. And in any case they'll likely have better resources than a mega bank's private client group.

fka ftc said:

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Not sure many banks are going to fund you cash to invest in a business unless you have some other collateral they would be interested in. There may be something specific to O&G that offers this opportunity (i.e. funding to obtain an interest in a producing asset - that is beyond my experience), but just borrowing to purchase equity would be unusual to me.

Also, if the opportunity for return is "very good" then that would usually indicate higher risk. Interested to see what others come up with.

But I would tend to think you want an O&G focused bank as previous poster suggested.

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Reserve Based Lending is common in the industry. That could definitely be an option for me but the ownership structure makes that a little more complicated I think but I'm not sure.

Yes, there is definitely risk but because of the unique position I'm in, I think even risk-adjusted it is a compelling story. Can't really go into more detail at this time.

GarlandAg2012 said:

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fka ftc said:

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Not sure many banks are going to fund you cash to invest in a business unless you have some other collateral they would be interested in. There may be something specific to O&G that offers this opportunity (i.e. funding to obtain an interest in a producing asset - that is beyond my experience), but just borrowing to purchase equity would be unusual to me.

Also, if the opportunity for return is "very good" then that would usually indicate higher risk. Interested to see what others come up with.

But I would tend to think you want an O&G focused bank as previous poster suggested.

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Reserve Based Lending is common in the industry. That could definitely be an option for me but the ownership structure makes that a little more complicated I think but I'm not sure.

Yes, there is definitely risk but because of the unique position I'm in, I think even risk-adjusted it is a compelling story. Can't really go into more detail at this time.

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No need to. My experience is borrowing for residential construction. Traditional borrowing base lending to build houses, that was easy.

When I had another unique opportunity that was cash intensive but with no default risk on receivables, they wanted lots of personal guaranties and blood of my first born. But having a bank that eventually understood the risks and the situation eventually proved fruitful.

Good luck!

Can you ask your peers at work what banks they use? This is pretty typical in PE-backed O&G companies. Getting to piggy back on someone else's paperwork and reserve report should save you and/or the bank some money if you can find a bank that's already loaning to one of your peers.

Keep plenty of spare capacity on your credit facility. You have to pay a small amount for the additional capacity, but when the bank engineer decides to give your reserves a nice haircut or cut the price deck in 1/2, you'll be glad you have additional capacity.

American Momentum, Bank of Texas (both the BOK related and the other one without retail locations), and Frost Bank all do these type of credit facilities. I'm sure there are many others, but those are big enough that they shouldn't have to syndicate under $50 million and small enough that you should be able to build a relationship with your banker.

Edit: Most will want a personal guarantee or have hedging requirements. In my experience, they let me choose which I wanted. Hedging can be a headache, personal guarantees can be stressful.

Each bank will have a slightly different formula, but they will basically loan 65% of PDP PV9. The math will be different, but they all get to the same number. Some will loan on PUDs, but they will have a time limit and as well a max PUD:PDP ratio.

Negotiate the fees, because no matter what the banker tells you, they are negotiable. You will probably be working with someone who is a layer or two below the banker making decisions. Don't go around anyone, but try to keep the decision maker copied on emails when you ask for better terms.

I haven't been through this process in a couple of years, but I could write a book on it. I'm happy to offer advice or answer any questions.

I'm with JPM's PB and can talk through it with you if that would be helpful. DM if so…

Chase will lend against your securities to generate liquidity. You will likely need to also look at some of the larger regional banks private wealth groups that will qualify you with $1MM in assets vs JPM Private Bank at $10MM.

I don't think any bank will fund your equity or maybe non-op WI in a deal.

With that said, send me a PM, I can hear the opportunity and maybe point you in a better direction.

All the big banks have a separate O&G Private Banker office, they also have resources most regional banks do not have. They are also harder to deal with, especially if they don't know you or you're just starting out. But if you know your stuff and have a good track record those folks can be incredibly helpful. An FA can help you with margin, he won't do much if you're looking for outside financing.

I work in this space. Happy to assist.