The Pre-qualification Process The MMS manages its pre-qualification process through the RIK Program’s Mid Office organization. Over 50 natural gas and 40 crude oil purchasing companies have, to date, pre-qualified for the participation in the RIK competitive sales program, with additional companies expressing interest each month. More than 50 companies have been awarded sales contracts. Many of these companies are recognized leaders in the domestic energy industry. To pre-qualify for participation in MMS’s competitive sales, a company needs to initially contact the RIK Mid Office and provide an indication of interest. The Mid Office staff will assist the company in completing the pre-qualification process. The two-step pre-qualification process begins with the Mid Office providing copies of the standard base sales contracts that are used by MMS for its RIK commodity sales. For natural gas, the base contract is the NAESB Base Contract for Sale and Purchase of Natural Gas, including MMS Special Provisions. For crude oil the base contract is "RIK Crude Oil General Terms and Conditions," based on the Conoco General Terms and Conditions contract. Companies seeking pre-qualification must agree with the terms of the base contract that will be used for an award if the company is successful in the competitive sale process. The Mid Office staff is available to answer questions regarding the terms of the base contracts. An additional information filing is necessary for companies seeking to participate in the Small Refiner Program. In the second step, a determination is made by MMS of the company’s financial wherewithal, or creditworthiness, to participate in the RIK Program. For public companies, MMS obtains financial statements from publicly-available sources. For privately-held firms, the Mid Office will request that financial statements be provided. After a determination of the overall creditworthiness of the company, the MMS will issue an amount of unsecured credit for purposes of competitive sale bidding and contract awards. MMS may request updated or specific financial information in particular situations and may reissue approved lines of credit. In situations where the company signing the base contract and submitting a bid is different than the pre-qualified company, such as affiliates or wholly-owned subsidiaries, MMS will require a parent guaranty to extend the approved line of credit to those parties. Credit Monitoring The RIK Mid Office continuously manages MMS’s risk exposure by monitoring and assessing the creditworthiness of potential and active RIK purchasers. MMS calculates credit exposure based on the projected value of 60-days delivery of production. In those cases where delivery values exceed the amount of credit issued by MMS, the company may be required to provide a secured financial assurance in the form of an Irrevocable Letter of Credit, bond, pre-payment, or other mutually-agreeable surety instrument.
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