Today, there is more capital available to oil and gas producers than at any time in the past two decades, but you have to know who has it, on what terms they will invest it and what they expect in return.

Producers continue to have strong access to commercial bank debt and, as bankers’ price decks have gone up, they have become more aggressive, moving out on the curve to lend more money for proved undeveloped reserves (PUDs).

As energy matters have come to dominate the headlines, private equity firms devoted to energy investments have mushroomed in quantity.What’s more, the amount of money they have raised in the past two years goes far beyond what was seen only a few years ago. It is not uncommon for a fund to raise $1 billion or $2 billion, and to commit to start-up E&P firms in amounts of as much as $500 million—even if the start-up has no assets or cash flow yet.

According to Cosco Capital Management, at year-end 2006 there was some $17 billion of private equity capital committed to the upstream and midstream space—but not yet spent. Unfortunately, these funds are looking for low- and medium-risk deals and are not apt to fund exploration or individual wells.

The biggest dilemma for producers and executives with start-up firms is to find the right match between the type of capital needed and its intended use. Do the E&P company and the money source agree on strategy, deal terms, the split of the equity stake and the timing of the final exit plan?

There are several new financial intermediary firms who are the link between those with an idea to drill, acquire acreage or buy production, and those with the capital who are looking for a way to invest in oil and gas. They can help screen deals and make the introductions that can lead to a good match.

In her remarks, Ms. Haines will provide an update on where the various capital sources stand and trends in deal terms.

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