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Oil & Gas Development Loans
The Oil and Gas Development Loan Program is designed to assist North Dakota developers in increasing oil and gas production in existing wells.
This program provides for BND to participate in loans for oil and gas rework, recompletion and enhanced recovery operations, and for the purchase of producing oil and gas wells.
Qualifying Requirements
Borrower - The borrower shall be a "developer" who is a resident of North Dakota or a corporation generating 50% or more of its income within North Dakota.
Participation Loan - This is a participation program and a financial institution initiates a request to BND for its participation. BND's participation percentage is negotiated on a loan by loan basis. In no case will the lead lender's portion be less than 10% of the total loan amount.
Loan Limit - BND's maximum loan participation amount is $100,000.
Use of Proceeds - The proceeds of a loan shall be used for oil and gas well reworking operations; oil and gas well recompletion operations; oil and gas well enhanced recovery operations, including secondary and tertiary recovery operations and for the purchase of producing oil and gas wells.
If the loan is for a reworking operation, a recompletion or enhanced recovery operation and if the borrower has less than 51% of the working interest in the well, a written agreement shall be obtained so that at least 51% of the ownership of the well has agreed to the rework, recompletion, or enhanced recovery operation with the intent to increase production.
Information - BND will act upon a participation request when the following information is received:
- The previous three years financial statements.
- Personal histories of the individuals, including other oil and gas interests.
- Production records, costs and expense records and drilling history.
- Evidence of ownership.
- A five year cash flow projection and expense projection.
- An engineering report. This report must be conducted by a registered professional engineer, independent of the borrower.
- A copy of all rent and royalty agreements.
- A copy of any lease agreements.
- Joint operating agreement (if applicable).
- An agreement from the borrower to conduct an annual engineering reevaluation of the project.
In addition, the following information and documentation, if applicable, is required prior to the closing of the loan:
- A title opinion on the property.
- Credit agreement, mortgage, security agreement, assignment of production and financing statement.
- UCC financing statements - state and county.
- Certified articles of incorporation and corporate bylaws.
- Certificate of good standing.
- Evidence of insurance.
- Transfer order/division order.
- Collateral evaluation.
- Assignments of rents and royalties.
- An agreement from the borrower to conduct an annual engineering reevaluation of the project.
Equity - There is no minimum equity requirement. All applications are evaluated on a loan-by-loan basis.
Collateral - Collateral is required to protect the interest of BND. This collateral shall be of such a nature that repayment of a loan can be reasonably expected.
Security for a loan is evaluated on a loan-by-loan basis. Examples of acceptable security are real estate, machinery, equipment, royalty payments, accounts receivable, inventory, leasehold interests, assignment of life insurance, letters of credit or guarantees. In addition, personal guarantees are required on all corporate and partnership borrowings.
Application Process
Application by a lead lender is required for BND's participation. See application
for additional documentation required when submitting a request to BND.
Lead lender is responsible for servicing the loan.
Interest Rate
The interest rate on BND's participation percentage is equal to BND's base rate. This interest rate will float according to the base rate and is adjusted on the first of the month following any change in the base rate.
The interest rate charged at the time of funding by the lead lender may not exceed 3% above BND's base rate and may float.
Repayment Terms
The repayment terms will vary depending upon the cash flow and production of the well. In no case will the term of the loan exceed 36 months.
Fees
The lead financial institution may charge an origination fee of up to 1% of the total loan amount, which is shared with BND.
For more information about this program or other Bank of North Dakota programs,
contact:
Bank of North Dakota
700 East Main Ave
PO Box 5509
Bismarck ND 58502-5509
(701) 328-5671
1-800-472-2166 ext. 5671
TDD (Telephone Device for the Deaf) 1-800-643-3916
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