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N atexis Banques Populaires

N atexis Banques Populaires. NOT AN OFFICIAL UNCTAD RECORD. FINANCING THE INDEPENDENTS. F ramework – Part. 1. Independents in the new oil & gas market Opportunities in emerging markets Emerging countries: a growth relay Expansion of oil independents

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N atexis Banques Populaires

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  1. Natexis Banques Populaires NOT AN OFFICIAL UNCTAD RECORD FINANCING THE INDEPENDENTS

  2. Framework – Part. 1 • Independents in the new oil & gas market • Opportunities in emerging markets • Emerging countries: a growth relay • Expansion of oil independents Key challenges to be faced by Independents • Advising & financing the independents • Exploration • Financing Development & Acquisitions

  3. EMERGING COUNTRIES: THE GROWTH RELAY Independents in the new oil & gas MarketOpportunities in Emerging Countries • Current production > New reserves discovery • Traditional assets are mature (North Sea, Gulf of Mexico…) • Fierce competition and high production costs • Decreasing replacement rate of World Reserves • Arising of local companies in emerging areas (Africa, Caspian Area, Latin America, Asia) with a strong potential in Africa

  4. Independents in the new oil & gas MarketEmerging Countries: The Growth Relay • Promising zones • Wide range of attractive & still unexploited reserves • Exploration / Early production phase assets • Mature fields no longer profitable • Attractive economic & fiscal environment • High potential assets • Favourable price context • Improvement of oil technologies

  5. Independents in the new oil & gas MarketExpansion of Oil Independants • New players face various problematics: • Legal environment • Buying assets through tenders or direct negotiation • Buying companies (100% or less) which own assets or licences in emerging countries • Establishing a JV with local partners • Managing independance • Farming in / Farming out with Independents and/or Big names • Finding relevant partners • Choosing appropriate contractors at an effective cost rate & time schedule • Financing exploration, development and acquisitions

  6. Framework – Part. 2 • Independents in the new oil & gas market • Opportunities in emerging markets • Emerging countries: a growth relay • Expansion of oil independents • Advising & financing the independents A tailor-made approach at each step of Independent’s life: • Exploration • Financing Development & Acquisitions

  7. Advising & Financing the IndependentsBenefiting from our expertise • We can assist implementing Independent’s strategy: • Technical & legal advising as well as introduction to a large network of reliable professionals in the oil & gas industry • Raising funds and financing them at each step of exploration, development & acquisitions

  8. PRIVATE PLACEMENT PARTNERSHIP BRIDGE FINANCING RESERVE BASED LENDING Advising & Financing the IndependantsProject stages • Exploration phase • High risk / High reward • Investors’ role • Before First Oil • Development risk • Investors / Banks’ role • Development phases • Reserves are identified • After First Oil • Operational risk • Banks’ role IPO Farm-Out

  9. Advising & Financing the IndependentsWhat is RBL ? • RBL: a US-Born Financial Product • Methodology derived from standard transactions • Valuation of assets Borrowing Base • Lending backed to physical assets generating cash (producing field) • Benefits from well-established legal systems

  10. Advising & Financing the IndependentsWhy RBL ? (1/2) • Traditional Corporate Lending • Non significant balance sheet and P&L accounts • Corporate banks uncomfortable with emerging countries • Pre-Export Financing • Small production (PDP): facility insufficient to fund asset development • Financing long term investments with short term credit ?

  11. Advising & Financing the IndependentsWhy RBL ? (2/2) • Project Finance • Quality of the Sponsor • Lack of flexibility • Development Risk (full asset development) • New Equity • Cost • Dilution of existing shareholders • Time schedule

  12. Advising & Financing the IndependentsRBL: A Structured Instrument adapted to Independents • Why is it adapted to Independents ? • Based on asset cash flows, not on corporate CF • Country risk allowable even with limited asset portfolio • Tailored to financing needs and company development • Structured on purpose: Senior debt, Stretch • Allows risk taking without equity dilution

  13. Advising & Financing the IndependentsRBL: ABorrowing Base mechanism • Facility amount determined by a pure cash flow analysis, driven by the value of oil and gas reserves following technical due diligence • The Borrowing Base is a structure that follows the performance of the company, with an amount evolving jointly with: • The development of current assets • The acquisition of new oil and gas interests • The Borrowing Base can be multi assets and multi countries

  14. Advising & Financing the IndependentsRBL: Typical Senior structure • BRIDGE • Facility: Amount fixed on a case by case basis • Purpose: Exploration and development of the existing reserve base and acquisition • Tenor: 3 to 6 months, until repaid by Senior facility • SENIOR FACILITY • Facility: Fully revolving credit facility • Borrowing Base: Based on Proven reserves (North sea : Proven + Probable) • Purpose: Working capital, exploration and development of the existing reserve base and acquisition • Tenor: 3 to 8 years • Collateral: Charge on interests in oil & gas properties • Collection Account : Domiciliation of revenues at the agent’s counters • Amortization: According to cash flow ratios

  15. Advising & Financing the IndependentsRBL: Typical Junior structure • STRETCH Identical to senior except : • Facility: Up to additional $50 million (subordinated credit facility) • Purpose: Development of the existing reserve base and acquisition • Amortization: According to cash flow ratios (less restrictive than senior tranche) • MEZZANINE Identical to senior except : • Facility: Amount fixed on a case by case basis (subordinated credit facility) • Purpose: Acquisition • Tenor: Senior facility Tenor + 1 day • Amortization: Bullet

  16. MEZZ. STRETCH MEZZ. STRETCH Advising & Financing the IndependentsRBL: Typical structure Banks finance up to 2/3rd of asset value 35% EQUITY +7.5% 50% +7.5% 7.5% 7.5% ASSET VALUE SENIOR SENIOR 50% Development Working Capital Acquisition

  17. Conclusion • Your Banker – Your Partner • Technical & Legal Advising • Introduction to Reliable Professionals & Partners • Raising Funds • Financing Development & Acquisitions

  18. THANKYOU • Natexis – Natural Resources & Related Industries 45, rue Saint Dominique 75007 PARIS phone : + 33 (0) 1 58 19 30 19 Fax : + 33 (0) 1 58 19 38 89 • Laure PIRONNEAU Head of Africa & Middle-East e-mail : laure.pironneau@nxbp.fr phone : + 33 (0) 1 58 19 28 79 • Pascal NICODEME RBL Team e-mail : pascal.nicodeme@nxbp.fr phone : + 33 (0) 1 58 19 33 41

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