This practice note discusses the key characteristics of reserve-based loans (RBLs). Oil and gas (O&G) exploration and production (E&P) activities are capital intensive. O&G companies have several main ways of financing these activities, including equity financing, third-party high-yield debt financing, and reserve-based financing. Both equity financing and third-party high-yield debt financing are expensive for the borrower, and so many O&G companies turn to secured credit to finance their E&P activities. The collateral securing these loans is often the borrower’s oil and gas reserves (hence why these loans are “reserve-based”). RBLs have been common in the industry in recent years, especially among non-investment grade E&P companies.