Jan 18 - Standard & Poor's Ratings Services today published an article titled, "Despite Risks, We Expect Excellent Recovery On Most Reserve-Based Lending Facilities Of E&P Companies," which highlights the excellent historical recovery rates of reserve-based lending (RBL) facilities used by oil and gas exploration and production (E&P) companies and that Standard & Poor's believes they will continue. Standard & Poor's rates more than 60 U.S. speculative-grade ('BB+' and lower) E&P companies, and nearly all of them use RBL facilities as a source of funding. RBL's are revolving credit facilities, allowing companies to borrow and repay amounts as needed. A borrowing base mechanism determines an RBL's borrowing capacity, and the borrowers' hydrocarbon (oil, natural gas) reserves, which are typically their primary asset, secure the loans. "We believe the terms and conditions in the facilities including the first-priority lien, overcollateralization of the borrowing base, the unilateral discretion lenders have in adjusting the borrowing base, and the presence of financial maintenance covenants are important factors behind this excellent track record," said Standard & Poor's credit analyst David A. Kaplan. He also went on to say that, "Although we expect RBLs to continue to achieve full recovery in most instances, the potential for less than full recovery exists due to a variety of risks." These include the collateral value being subject to the volatility of commodity prices, the inherent uncertainty in reserve estimates, and evolving market dynamics which we believe could lead to longer and/or deeper industry downturns in the future. The article goes on to examine risks to the excellent track record of full recovery of RBL facilities such as sensitivity reserve values have to fluctuating hydrocarbon prices; the limited frequency of reserve reassessments; and risks involved in estimating the reserves, despite technological advances. The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.