Oil & Gas
The Colorado Oil and Gas Conservation Commission has recently updated its Form 3 to XXXXXXX
Surety bonds are viable financial instruments that are utilized in all 50 states for a host of different financial assurance obligations.
- Speaking specifically to oil and gas, CAC Specialty utilizes the issuance of surety bonds for almost every energy client in their portfolio.
- While all 50 states have some form of financial assurance where bonds are an allowable instrument, oil and gas bonds are most common in Texas, Colorado, Oklahoma, New Mexico, California, North Dakota, and Louisiana.
Advantages of Surety Bonds vs Letters of Credit and Cash
|Surety Bond||Letter of Credit||Cash|
|Efficient Use of Capital||Varies|
|Off Balance Sheet Obligation|
|Satisfies P-5 Requirement|
|Outsource management and Processing|
In the event that your bond goes into a claim with the COGCC, both CAC and the underlying surety will work with the operator to validate any claim made on the bond prior to payment.
- The same cannot be said of a bank’s duty regarding an LC, and even fewer defenses are available when the state holds an operator’s cash.
- Outside of an annual premium for the bond, there is no additional cost to the operator.