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France Exploration and Production (Upstream) Market Analysis and Outlook to 2020 Drivers, Challenges, Fields, Blocks, Supply- demand and competitive landscape
M2PressWIRE, Apr 11, 2013
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Make strategic and financial decisions based on industry trends and capital expenditure
forecasts
Identify key business opportunities through detailed information on oil and gas fields and
forecasted production information
Develop a clear and complete understanding of the industry through asset by asset
information
Detailed Market Shares, company wise production and information on nature of industry
allows you to easily beat your competition
Identify the success strategies and financial status of key companies operating in the
industry along with their strengths and weaknesses
ISSN:
0014-3138
Title:
Financing the future. Petroleum Economist, 0306395X, Jun2009
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Business Source Complete
structurally flawed Mexican oil industry, where an under-funded Pemex is unable to supply
financing that the private sector is prevented from offering. The case for a reappraisal of the
structure of Mexico's oil sector has never been stronger.
The same applies to some other oil-rich countries. Iran has taken a similarly nationalistic
approach to oil developments, but, last month Seiffolah Jashnsaz, managing director of National
Iranian Oil Company, admitted that it will need foreign capital if it is to meet its plans to invest
$25bn-30bn a year in its oil sector -- sums that are necessary, according to Jashnsaz, for the
country to maintain its status within Opec over the next decade and a half.
But it seems unlikely that Pemex will be able to extricate itself from the operational, legal and
fiscal straightjacket that dooms it to failure.
The same can be said of PdV; like Pemex, the Venezuelan NOC has considerable socialspending obligations and its strategy is driven partly by political, not commercial, considerations.
Like Mexico, Venezuela's upstream sector is underperforming, partly because of under-funding,
but largely because of the government's decision to sack almost 20,000 engineers and other
oilfield workers in 2003. Crude production is just over 2m barrels a day (b/d), compared with
3.5m b/d in the late 1990s. Projects that could have a significant positive effect on Venezuelan
production -- heavy oilfields in the Orinoco Belt, for example -- require technical and financial
input from the private sector.
However, while economic conditions might suggest a softening of Venezuela's petro-nationalism
would be pragmatic, the government appears determined to exclude the private sector. President
Hugo Chvez is nothing if not tenacious: last month, the country promulgated a law giving the
state majority control over oilfield services companies and, at the time of writing, it had taken
over assets from 74 firms (see p27). The continuing harassment of private-sector investors could
undermine the efficiency of the oil sector's operating ability in the short term, but it also raises
political risk another few notches -- threatening investments in new ventures.
Contrast the Mexican or Venezuelan approach with the Brazilian model. Upstream investment is
booming, new discoveries continue to be made and production is at record levels. Petrobras,
meanwhile, continues to prove as resourceful on the funding side of its business as it is on the
technology side. Last month, the state-controlled firm signed an agreement with China
Development Bank (CDB) through which it will receive a 10-year loan worth $10bn in exchange
for the promise of future oil supplies.
Petrobras is not the only company to have tapped the Chinese state for funding. In recent months,
China has agreed loans-for-oil deals with Kazakhstan's KazMunaiGaz, Russia's Rosneft, Russian
pipeline monopoly Transneft, PdV and Angola's Sonangol.
A need for innovation
Those agreements and their sheer size -- the two Russian loans, for example, amount to $25bn -indicate a firm expectation in China that oil demand will grow robustly; and securing future oil
supplies at a time of low demand and low prices is good business practice.
But the loans also reflect a need for innovation in the energy-financing business (see p9). With
Western banks generally reluctant to participate in project financing, Islamic financing is taking
up more of the slack, as are multilateral lenders such as the European Bank for Reconstruction
and Development (EBRD). EBRD loans in the first three months of the year amounted to a
quarterly record of $1.1bn and were up by 64% on the year. And the bank says it will lend at
least $7bn this year, compared with $5.1bn in 2008.
Project finance remains even more scarce for low-carbon projects, calling for greater government
intervention. The UK has made some progress with the offshore wind sector: new subsidies
announced in April's budget (see p16) have already resulted in the decision to proceed with the
London Array offshore wind project (see p17). However, subsidies alone may not be enough to
stimulate investment on the necessary scale. In the short term, there must be a greater focus on
encouraging bank lending.
In addition, success will depend on the selection of subsidy mechanisms that spread risk
reasonably between the public and private sectors. There are, for example, potential weaknesses
in the Renewables Obligation, the mechanism in use in the UK for subsidising renewable-energy
projects. Funding under this system may, in the end, be greater than subsidies derived from feedin tariffs, the preferred funding mechanism in Spain and Germany. But feed-in tariffs tend to
provide a more transparent and stable form of subsidy and may, therefore, prove more effective
in encouraging investment than the more volatile UK system (see p17).
Much too will depend on the price of carbon. In just six months' time, in Copenhagen, it will
become clearer what policy support the world is prepared to give to green energy.
Title:
Iran to sell $80 mln bonds to fund upstream oil and gas projects By: Karimov, Fatih,
Trend News Agency, Apr 12, 2014
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Iran to sell $80 mln bonds to fund upstream oil and gas
projects
~~~~~~~~
Fatih Karimov
April 12--Iran will sell 2 trillion rials (about $80 million) worth of bonds to fund upstream oil
and gas projects.
For the first time in the country, bonds will be used to finance upstream oil and gas projects,
Iran's Fars news agency quoted Ali Sanginian, the managing director of Amin Investment
Company, as saying on April 12.
The upstream oil and gas sector is also commonly known as the exploration and production
sector.
Iran's oil ministry plans to issue 9 billion worth of bonds in the current Iranian calendar year,
the IRNA News Agency reported in December 2013.
The National Iranian Oil Company, the National Iranian Gas Company, National Iranian Oil
Refining and Distribution Company (NIORDC), and the National Iranian Petrochemical
Company will issue 5 billion, 1 billion, 1 billion, and 2 billion, respectively.
More than 40 trillion rials (about $1.6 billion) worth of bonds were sold three years ago to
finance South Pars gas field development plan, but none of the phases of the gas field has come
on stream yet.
The South Pars gas field covers an area of 9,700 square kilometers, 3,700 square kilometers of
which are in Iran's territorial waters in the Persian Gulf.
The remaining 6,000 square kilometers, i.e. North Dome, are in Qatar's territorial waters.
The Iranian gas field, which is divided into 29 phases, contains 14 trillion cubic meters of natural
gas, about eight percent of the world's reserves, and more than 18 billion barrels of LNG
resources.
Title:
Asia Pacific Oil and Gas Industry Research Guide (Q1 2014) - Analysis of Upstream,
Midstream and Downstream Infrastructure, Investments, Companies and Outlook to 2025
M2PressWIRE, Mar 27, 2014
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Asia Pacific Oil and Gas Industry Research Guide (Q1 2014)
- Analysis of Upstream, Midstream and Downstream
Infrastructure, Investments, Companies and Outlook to
2025
Dublin - Research and Markets
(http://www.researchandmarkets.com/research/zzlcm9/asia_pacific_oil) has announced the
addition of the "Asia Pacific Oil and Gas Industry Research Guide (Q1 2014)- Analysis of
Upstream, Midstream and Downstream Infrastructure, Investments, Companies and Outlook to
2025" report to their offering.
Asia Pacific Oil and Gas Industry Research Guide is a comprehensive handbook on Asia Pacific
oil and gas markets. The report analyzes in detail 18 markets in the region along their complete
oil and gas value chain. Country wise forecasts of over 16 parameters including oil, gas,
gasoline, diesel, LPG, fuel oil, LNG consumption and production in addition to GDP and
Population forecasts are provided. Further, country wise details of exploration blocks, licensing
rounds, refining capacity, coking, FCC, HCC capacity, liquefaction, regasification capacities and
storage capacities along with planned cross-country pipelines are provided in detail. Further,
complete details of over 200 refineries, 113 LNG Terminals, 450 storage terminals are provided.
All potential investment opportunities in each country are also provided.
Scope
18 countries across Asia Pacific covered, which include-Australia, Brunei, China, India,
Indonesia, Japan, Kazakhstan, Malaysia, Myanmar, New Zealand, Pakistan, Papua New
Guinea, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam
16 Parameters are forecasted annually for each country including- oil, gas, gasoline, LPG,
diesel, fuel oil, LNG production and consumption along with GDP and Population
7 capacities are forecasted annually for each country including CDU, Coking, FCC,
HCC, Liquefaction, Regasification and Storage Capacities
All potential investment and business opportunites are provided by country
Detailed SWOT analysis for each of the 18 countries are provided
Five leading companies along with their business description, SWOT and financial
analysis have been included
Title:
Upstream oil sector. Chemical Business, 09703136, Sep97, Vol. 11, Issue 2
Database:
Business Source Complete
Title:
Upstream mainstream. By: Nelthorpe, Tom, Project Finance & Infrastructure Finance,
17567866, Nov2010, Issue 315
Database:
Business Source Complete
Upstream mainstream
Contents
1. The three bonds closed for Latin American drill-ships now provide offshore operators
with a full range of capital markets options. Is a staggered draw-down now the
commercial banks' main competitive advantage?
2. High-yield, low repeatability
3. Lancer's long march
4. The father refinances, the son nears close
5. RDSUDW,Ltd
6. Lancer Finance Company
7. Norbe VIII/IX Finance Ltd
Latin American Oil & Gas
The three bonds closed for Latin American drill-ships now provide offshore operators with a full
range of capital markets options. Is a staggered draw-down now the commercial banks' main
competitive advantage?
As far as the operators of deepwater drillships in Latin America are concerned, the Deepwater
Horizon disaster was little more than a blip. US drilling operators face the possibility of tighter
regulation, fewer opportunities and higher potential liability for accidents. But Brazil's national
oil company, Petrobras, is pressing ahead with plans to charter large numbers of rigs for its presalt exploration and production programme.
The Petrobras charters are long-term, generous, and do not feature market price risk. They
increasingly come with local content requirements, part of Brazil's plans to develop a
shipbuilding capability on a par with that of South Korea and Singapore. But these will largely
affect forthcoming rounds of tenders, and do not affect sponsor's plans to finance existing
charters.
Until recently, Petrobras would also have been concerned with sponsors' ability to raise both debt
and equity for rig construction and purchases. In the wake of the crisis, pricing jumped sharply,
market rates for the more widely used rigs plunged, and a number of global rig operators looked
very wobbly. What looked like an opportunity for a distressed asset buyer also seeded doubts
about the ability of Brazil's sponsors to raise the equity they needed to fulfil their charters.
The debt markets recovered rapidly. After a hard-fought restructuring, Grupo Schahin came to
terms with its lender group on its Black Gold deal, with banks consenting to an extension on the
deal in exchange for higher pricing. The extension was needed because of delays in building the
two rigs covered by the financing, which were being built at the Yantai Raffles shipyard in
China. The higher pricing essentially wiped out any benefits from the cheaper Chinese
construction contract, and hampered Schahin's ability to move on to its next project, Black
Diamond, but maintained Schain's bank following.
Towards the end of 2009, Odebrecht Oil & Gas closed a $1.34 million commercial bank and
export credit agency financing for its Norbe VIII and IX vessels. That financing, which consisted
of a $274 million GIEK-covered Eksportfi-nans direct loan, $165 million direct Kexim loan,
$135 million Kexim-covered loan and $770 million commercial bank loan, sold strongly, on the
back of Odebrecht's size, respectable credit rating, and banks' willingness to return to the
Brazilian offshore sector.
High-yield, low repeatability
But the most promising financing development for the smaller Brazilian operators took place in
Mexico. In April, Grupo R, a Mexican conglomerate with a long track record of providing
offshore services to Mexico's national oil company, Pemex, used a high-yield bond to help it
complete the $655 million purchase of the PetroRig III from PetroMENA, which was in
bankruptcy.
The $260 million high-yield bond priced much earlier than the close of the acquisition on 24
February, at the tail end of the first spurt in project bond activity of 2010. The bond was rated
B3/B (Moody's/S&P), and priced at a discount of 2.869% and coupon of 11.875% for a yield of
12.5%. Jeffries was lead arranger on the bonds, which complemented a much more reasonablypriced BBVA-led $225 million senior secured bank deal, which had a margin of 375bp initially,
rising to 400bp in years three and four and 425bp in year five.
Given this comparison in pricing, it was easy for commercial lenders to doubt that capital
markets could ever win a substantial slice of the rig financing market. Indeed, bondholders of the
Norwegian shipping and oil services groups that fell victim to the crunch would have been
inclined to agree. The PetroRig bonds were second lien, and were necessary because PetroRig's
charter with Pemex was short, at five years, and reset to a market rate for the last three of that.
With the $225 million in bank debt the maximum that the banks could fund at the time, the
Garza family, which controlled Grupo R, could either look to outside equity providers or try the
high yield route. In February 2010 it was easy for a lender to view the bond market as more of an
equity substitute than a bank debt substitute. The degree of structuring on the debt bore this
verdict out.
Lancer's long march
But the run of balmy conditions in the US bond market continued throughout 2010, and at the
same time that PetroRig closed, rumours surfaced that Schahin was working with Nomura to
arrange a bond deal for one of its fleet of rigs. Nomura did not have an established presence in
the rig financing market, but had made hires from Merrill Lynch's principal finance group, which
had completed several cross-border issues for Latin infrastructure issuers in the mid-90s.
Schahin needed to raise some equity for the Black Diamond portfolio, which is now in the
market for $1.4 billion in debt, including an $800 million commercial bank loan. While Schahin
might have been able to release some equity during a post-completion refinancing of the Black
Gold vessels, the delays to those ships meant that Schahin had to use another asset to raise this
equity.
Nomura pitched Lancer, which can operate in water depths of 1,500m, drill to depths of 6,000m,
and was built in 1977, to Schahin as the best candidate. The ship is operational, and benefits
from a charter with Petrobras running to 2016, but has an estimated remaining useful life of 11.5
years. Getting a financing for Lancer to investment grade, and therefore raising cost-effective
capital with high leverage for recycling, required intensive structuring.
The resulting deal resembled a securitisation much more closely than a conventional project
bond, with multiple, detailed, investor protections designed to distance the asset from the
Schahin credit as much as possible. The $270 million issue received ratings of Baa3/BBB-sf
(Moody's/ Fitch, the sf denoting a structured finance issue), in part on the back of a complex cash
waterfall structure and $18.5 million in funded reserves. According to Roland Vigne, a vicepresident at Nomura in Sao Paulo "the advantage of using the structure is you achieve much
better leverage and can lower your borrowing costs substantially."
The key to getting agencies, and putative buyers of the private placement, comfortable, was in
coming up with creditable valuations for the vessel both with and without a charter. The
financing is designed to amortize completely over its life, but a bondholder would look very
carefully at loan-to-value ratios. These govern the ability of bondholders to trap cash, in the
event that the residual value is not enough to pay the last few debt repayments, and accelerate
prepayment, if the loan to value ratio including the charter, and thus the present value of charter
revenues, fell below a certain level. The bondholders, through the trustee, also have the ability to
enforce their collateral and sell the asset, if need be.
According to Fitch's assessment, Lancer has a 60% ratio at issuance, and 15-35% in 2016. Its 33
years of age is belied by some extensive renovations to its topside equipment. The vessel has
also averaged 96.3% uptime for the last ten years, indicating that Schahin, whatever its financial
resources, is a capable operator, one of the few with experience operating a deepwater vessel for
Petrobras and Petrobras has been chartering the vessel since 1992.
One feature of the charter is that on top of the $238,500 day rate, Petrobras pays Schahin a
separate taxable operating payment to Schahin, which is pledged to bondholder, but only meets
about 40% of operating costs. The remainder are paid from the bottom of the cash waterfall, with
a trap on cash at the bottom is the debt service coverage ratio falls below 1.4x. This feature is
present on the more recent generation of charters, and the inclusion of the operating payment in
the waterfall simply allows bondholders to take control of the vessel more easily if the financing
defaults.
The issuer, British Virgin Islands-registered Lancer Finance Company, Delaware registered
charter counterparty, Turasoria SA LLC, and Panama-registered ship-owner, Turasoria SA, are
also made bankruptcy remote from Schahin using a pledge of shares, granting the trustee proxy
power to vote on bankruptcy, and because to drag the project into a bankruptcy proceeding might
allow Petrobras to cancel the charter.
The bonds closed on 21 October, after an extensive period of tightening and tweaking of the
documentation. This long lead-time was natural, according to one participant in the deal, given
the challenges in getting a single-asset financing to investment grade, and the need to adapt
structures in use in other industries, most notably conventional shipping and toll roads, to the
project.
The financing was ready to go in March, but was delayed after the ban on offshore drilling in the
US took effect, since the ban had the potential to seriously affect residual values and potential
bond buyers were briefly concerned that Petrobras might be subject to a similar ban. The final
coupon on the deal, at 5.5%, was a little under half PetroRig's, though yields on the seven-year
Treasury had fallen by roughly 1.2 percentage points between the two deals.
The father refinances, the son nears close
Neither deal featured any construction risk, however, a boost to the commercial lenders' position
that bondholders could not assess this risk as well as the banks. Late in 2009, just as it was
putting the finishing touches to the Norbe VIII and IX financings, Odebrecht was trying to
decide which of its existing rig assets would make the best candidate for a capital markets deal.
"We wanted to diversify our funding sources," says Marco Rabello, the chief financial officer of
Odebrecht Oil & Gas, "and had to decide whether one or both of the Norbe VIII and IX vessels,
or the Norbe VI rig, which was financed a little earlier, would work best".
The Norbe VI financing, a $440 million deal led by ABN AMRO, closed long before the crunch.
The financings for the later two rigs reflected post-crunch bank pricing expectations, and the rigs
have fixed-price ten-year charters that were certain to be appealing to bondholders. Odebrecht
decided to take the later two rigs to market, mandating HSBC and Santander to lead the deal,
with Deutsche and Banco do Brasil coming in at a later date.
The rigs are close to completion, with the VIII vessel 95% complete and due for a January 2011
delivery and IX 88% complete, and due in April that year, according to Fitch's BBBsf rating in
late October. The rigs are in commissioning and the charters with Petrobras allow for a sixmonth delay. Bondholders would rely on a full refund guarantee from Daewoo Shipping and
Marine Engineering, which is building the rigs, backed up in turn by Kexim letters of credit.
But the size of the proposed financing for the two Norbe rigs -- $1.5 billion -dwarfed the earlier
two rig deals, Rabello notes that Odebrecht would have to call on bondholders who were familiar
with Odebrecht and sister companies such as Braskem that had already visited the bond markets.
The Brazilian conglomerate, with a series of toll road issues in Peru, and recent success in the
Brazilian roads sector with the Rota das Bandeiras financing, has experience of opening up
project bond markets.
The bonds, with a 10.5-year maturity, priced at 99.818% of par, at a spread of 370.3bp over the
equivalent Treasury, for a coupon of 6.35%, and a yield of 6.375%. The biggest challenge, notes
Helena Ramos, structured operations manager at Odebrecht Oil & Gas, was structuring the bonds
in such a way as to minimise refinancing risk. "The agencies do not like to award investment
grade ratings to transactions with refinancing risk," adds Rabello.
The Norbe rigs have a very long useful life -- up to 40 years -- but the sponsors had to
incorporate a cash trap in the final six semesters of the charter that would fund a retention
account, which would then be used to pay down the 30% balloon on the bonds at maturity. This
solves in part the anxieties that bondholders might have about being left with a drill-ship, rather
than cash, in 2021. The issuer for the two rigs, Norbe VIII/IX Finance Ltd, lends the proceeds on
to separate operating companies, and while the assets are cross-collateralised, the charters with
Petrobras do not default.
Norte proves that bonds are possible for assets under construction, if the charters are long and
lucrative enough, if the construction security package is rock-solid, and if the sponsor is
experienced. Odebrecht's Ramos notes that while the sponsor did not guarantee the project's
operating performance its size and experience were important to investors. It would, agrees
Rabello, be possible to finance a new drillship from scratch in the bond market, though the cost
of carry would be a heavy one.
As if to stress this point, Odebrecht's next two drill-ships, ODN1 and ODNII, will be financed
with a similar cast of commercial banks (roughly $900 million) and export credit agencies ($400
million). The pricing on this deal, dubbed Son of Norbe, is likely to be much keener than the two
parents, maybe by as much as 100bp, at about 240bp over Libor making a refinancing much less
attractive. Interest in the deal, say Latin syndications bankers, was strong. The leads, BNP and
HSBC, brought in Banco do Brasil, Banesto, BTMU, Caja Madrid, Citigroup, Credit Agricole,
DNB Nor, ING, ItauBBA, Banca Intesa, Natixis, Santander, SG, SMBC, Unicredit and WestLB.
The three bond deals look like a natural progression, but their timing was a matter of luck, and
the three sponsors enjoy very different circumstances.
Still, Rabello says that the Norbe VI rig could still be a possible candidate for a bond
refinancing. There are, moreover, a number of Brazilian operators such as Petroserv, Quiroz
Galvao and Etesco that have financed their vessels with loan-to-value-based ship finance
structures, and they should see some immediate benefits in terms of leverage by refinancing with
a contract cashflow-based bond deal. As Nomura's Vigne notes, even where ECA-backed deals
make commercial bank financing very competitive, a bond market option can have a beneficial
effect on keeping this pricing low.
What looked like an opportunity for a distressed asset buyer also seeded doubts about the ability
of Brazil's sponsors to raise the equity they needed to fulfil their charters.
The key to getting agencies, and putative buyers of the private placement, comfortable, was in
coming up with creditable valuations for the vessel both with and without a charter. The
financing is designed to amortize completely over its life, but a bondholder would look very
carefully at loan-to-value ratios.
The Brazilian conglomerate, with a series of toll road issues in Peru, and recent success in the
Brazilian roads sector with the Rota das Bandeiras financing, has experience of opening up
project bond markets.
RDSUDW,Ltd
Status: Bonds closed 24 February, bank debt closed 10 March, funded 30 April
Size: $655 million
Location: Mexico
Description: Acquisition of semi-submersible ultra-deepwater drill-ship
Sponsor: Grupo R
Debt: $225 million non-recourse bank loan and $260 million bond tranche
Lead arranger and financial adviser: BBVA
Bookrunners: UniCredit, Natixis, Banco Espirito Santo, NIBC and WestLB
Bond bookrunner: Jefferies
Lender legal adviser and sponsor bond counsel: Clifford Chance
Bond counsel: White & Case
Lancer Finance Company
Status: Priced 21 October
Size: $270 million
Location: Brazil
Description: Recapitalisation of mid-depth drill-ship
Sponsor: Schahin Holdings
Maturity: 6 years
Coupon: 5.5%
Underwriter: Nomura
Title:
Are Nigeria's banks ready for an upstream revival? Project Finance & Infrastructure
Finance, 17567866, Dec2010
Database:
Business Source Complete
Bank, since local lenders now have repaired balance sheets and renewed naira and dollar
liquidity.
The start of a domestic independent sector
These banks will also benefit from a steady pipeline of small upstream deals that are within their
funding reach as international oil companies start to hand over their fallow, shallow and onshore
acerage. They are set to bene-fit from a shift towards local content, outlined both in the new
petroleum bill, which seeks to end the major oil groups' grip on 90% of Nigeria's re-serves, in
favour of newcomers and independents, and in Nigeria's Local Content Bill, passed in April,
which gives domestic firms priority in the awarding of oil blocks. The bonanza, which could see
local groups accessing an estimated 120 fallow fields off Nigeria, holding up to 120 million
barrels of oil, has already begun.
Last March independent oil and gas producer Afren closed a $450 million reserve-based debt
facility for the development of its offshore Ebok field. BNP, Natixis and Credit Agricole led the
five-year loan, repayable semi-annually with a margin of between 450bp and 550bp over Libor.
The initial deal is for $150 million but the loan can be increased to the full amount to fund any
subsequent phases of the Ebok field, in which Afren bought a stake in 2007. Exxon discovered
the field in 1968 and thought it had a capacity of 25 million barrels of oil. That is now at 105
million with an upside of 600 million barrels.
A flurry of local interest has also centred around oil giant Shell's decision to sell three onshore
and shallow water assets located in the northwestern part of the Niger Delta that includes 30
wells, with a production capacity of around 50,000 barrels of oil equivalent per day. The Shell
sale was the spur for the formation of a consortium of indigenous groups seeking both new
financing and to refinance existing deals from the local market, say Lagos bankers.
But bank debt won't come cheap for Nigeria's new players. International banks are increasingly
wary of financ-ing onshore and shallow water assets in the Nigeria Delta, where the in-surgency
has pushed projects offshore and pricing skywards. Local banks are less worried about the risk
but spon-sors will still have to pay a high price for liquidity. It could push prices up to between
700-800bp over Libor, pre-dicts one banker. Tenors beyond seven years are also a stretch, given
Nigeria's banks' ongoing struggle to match liabilities with long-term borrowing themselves.
Pausing for breath but LNG looks promising
Upstream and development financing activity for small indigenous operators may have picked
up, but demand from international oil companies has all but ground to a halt. The big groups
have stalled financings on projects until the much-anticipated petroleum bill is passed, when
uncertainty around the future regulatory and tax landscape should clear up. Shell says it has some
$40 billion worth of potential investment in deepwater oil projects in Nigeria on hold and UN
figures show foreign direct investment, mostly in the petroleum sector, sank to $5.85 billion in
2009 from $13.96 billion in 2006. Political uncertainties ahead of next year's election have acted
as another brake, as project developers hold fire lest the investment landscape changes again.
"The Nigerian government is the biggest player in the oil and gas industry," laments one banker.
Bankers are looking to a future pipeline in 2011/2012 when the bill should have passed and
would stimulate a steady deal pipeline both from internationals rejuvenating mothballed projects,
and Nigeria's reformed NNPC coming to the market in search of debt. Under the proposed
legislation NNPC will be stripped down to a profit-driven firm that can fund its own share of the
joint ventures through its own earnings and by raising money on the capital markets.While
greenfield programmes are on hold the market has turned its focus to brownfield sites. Bankers
hope the NGL2 project will be followed by more loans from the programme and by a significant
new satellite financing, the $4 billion Satellite 2 oil field financing. The first Satellite field closed
in 2005, with a margin of below 200bp. It directly funded three new oil fields with a seven-year
uncovered deal split into a $270 million international loan, a $90 million local bank loan and a
$250 million direct loan from ExxonMobil.
Other deals in the pipeline include Nigeria LNG, or NLNG, a joint venture that liquefies natural
gas for export, and whose shareholders includ NNPC, Shell, Total and Eni, which is reportedly
approaching international banks in search of $2 billion in financing. Standard Char-tered and
UBA are work-ing on the deal, with quotes for tenors put bet-ween 7 to 10 years, one banker
said. It is believed that part of the new loan will be used for upstream gas gather-ing facilities to
ensure gas sup-plies to the existing six trains. The $1 billion project loan from 2002 on the asset
has nearly been repaid.There is still no final investment decision on the $3 billion Brass LNG
venture, which has suffered long delays since the joint venture between the NNPC, Agip,
ConocoPhillips and Total got off the ground in 2004. The pro-ject, which is designed to export
10 mil-lion tonnes of LNG per year from 2012, has been hit by violence and in-stability in the
Niger region and changes to the tax regime. LNG liquefaction plants in Nigeria have also
suffered from political prevarication and a shift in energy policy towards diverting gas away
from export and towards inter-nal use to feed Nigeria's own desperate power needs.
Still, this shift made local gas oper-ators more confident in their plans to invest and borrow.
AccuGas, a wholly owned subsidiary of Seven Energy International, which trades as Septa
Energy in Nigeria and is a first-mover in the domestic gas market, signed a $70 million eightyear project finance facility with Stanbic IBTC Bank and UBA in June. Priced at 800bp over
Libor, the facility finances AccuGas's pipeline project in Akwa Ibom State and includes the
construction of a new 65km pipeline and a gas and liquids processing facility. It's the first phase
in Septa Energy's plans to use the Niger Delta's gas reserves to meet the growing energy demand
from power plants and industrial users in the region.The developments constitute good news, in
that Nigeria's banks are again putting their balance sheets to work for the right projects. Their
appetite for NGL2 illustrates how the banking crisis weeded out weaker players, allowing a
flight to quality. In fact, Lagos executives say banks' ability and willingness to lend has never
been as much of a problem as Nigeria's shifting political terrain and a desperate need for reform.
The stalled bill is their main hope, but until it is passed, the industry remains in a state of limbo.
Title:
FINANCIERS: DEBT-MARKET SITUATION COULD HAVE VARYING EFFECT
ON UPSTREAM CAPITAL ACCESS. By: Stell, Jeannie, Oil & Gas Investor - This
Week, 19405189, 8/27/2007, Vol. 15, Issue 34
Database:
Business Source Complete
"We think that it could, in fact, help us. When liquidity leaves the market, people who have
liquidity can find opportunity. We focus on mezzanine lending, and our debt is more attractive
now that a lot of the cheap debt has left the market."
Most energy investments are not as tied to the broader economy as generalist business. "We are
seeing a lot of opportunities and the risk-reward profile is getting better," Hull says. "Regardless
of the shake-up in the debt markets, we're doing okay. We're long-term investors so we try not to
let short-term swings affect our long-term deals."
~~~~~~~~
By Jeannie Stell
Title:
Donggi-Senoro upstream financing closes. Project Finance & Infrastructure Finance,
17567866, Jan2014
Database:
Business Source Complete
Title:
Oando Energy Resources secures funding for acquisition of Nigeria upstream oil and gas
business of ConocoPhillips. African Business News, 2/2/2014
Database:
Newspaper Source Plus
Title:
Yuzhno: Upstream unleashed. Project Finance & Infrastructure Finance, 17567866,
Jun2011
Database:
Business Source Complete
The three sponsors then looked to put in place a long-term financing for the project, backed by
take-or-pay gas sales agreements. The sponsors issued requests for proposals for the project
financing on 29 July 2010.
Societe Generale was named financial adviser, and 13 banks committed to the financing in
October 2010. Mandated lead arrangers were Gazprombank, Intesa, BTMU, Credit Agricole,
ING, Mizuho, Natixis, Societe Generale, SMBC, and UniCredit. BNP Paribas and WestLB took
lead arranger status, with DZ Bank classed as a participant. Bank appetite was strong for the
project, as the deal was around 60% oversubscribed, with Eu1.649 billion ($2.394 billion)
equivalent in commitments from the 13 banks.
The banks signed the project's loan agreement on 16 March, but it took two months to fulfill
conditions precedent and finalise the project documentation. This is because the project's gas
sales agreements are structured under Russian law, presenting enforcement challenges and
making the sponsor guarantee and indemnity package all the more crucial to the lenders.
Even though it took two months, sources involved in the deal have stressed that finalising the
project documentation was a smooth process with very few disputed points. Getting internal
approval from the sponsors took some time, and there were some tweaks round the edges of their
security packages. The sponsors also spent time finalising the wording of their request to draw
on the facilities.
The financing is comprised of $1.53 billion equivalent in multi-currency debt and $322 million
in equity. Mandated lead arranger status goes to 10 banks: Gazprombank, Intesa, BTMU, Credit
Agricole, ING, Mizuho, Natixis, Societe Generale, SMBC, and UniCredit. BNP Paribas and
WestLB took lead arranger status, with DZ Bank classed as a participant.
The eight-year debt is split between a dollar tranche, a euro tranche and a rouble tranche. The
rationale behind the rouble tranche is that it will decrease the project's hedging requirements, as
the project's revenue will be in local currency.
The split between euro and dollar tranches is a legacy of the project's bridge loans. This
arrangement also reflects the fact that dollars are Gazprom's currency of choice, because its
accounts are denominated in dollars, whereas the two German sponsors operate in euros.
The Eu474 million ($687 million) term loan and the $657.4 term loan both priced at the mid200bp range over their respective benchmarks. The contributions from all lenders are split
between the dollar and euro tranches, although the banks took varying ticket sizes.
The R5.9 billion ($208.5 million) tranche, which comes solely from Gazprombank, features a
fixed interest rate of 11.4%. The deal is highly leveraged, with gearing at 83%. Sponsors
Gazprom, BASF/ Wintershall and E.ON are providing $322 million in equity to round out the
financing.
The project has an annual cash sweep, with all cash left at the bottom of the project's cash
waterfall split between the lenders and sponsors 70:30. The project also has three reserve
accounts, an expenditure reserve account and two debt service reserve accounts.
Furthermore, the sponsors can only pay their 30% share of the cash into accounts not pledged to
the lenders if the reserves accounts are filled to a required level, and if debt service due on the
repayment date has been made. The cash sweep means that under the base case the loan will be
repaid by mid-2017.
Although the sponsor group features German participants, the project company,
Severneftgazprom, is registered in Russia and the gas supply contracts are denominated in rubles
and regulated by Russian law.
Although Yuzhno closed without ECA support, the upcoming RusVinyl PVC project features
ECA tranches, with BNP Paribas, HSBC and ING as mandated lead arrangers. The tranche will
come in at around Eu450 million ($633.6 million), split between Coface, with Eu350 million,
and ONDD, with Eu100 million. The ECAs will cover 95% of the political risk but the
commercial risk coverage is expected to be lower.
Severneftegazprom
Status: Financial close 25 May 2011
Size: Eu1.3 billion equivalent.
Location: Yamal-Nenets autonomous area of the Tyumen Region, Siberia, Russia.
Description: Development of the Yuzhno-Russkoye field, with reserves of 180.9 billion cubic
meters of gas and 20.35 million tons of oil and gas condensate.
Sponsors: Gazprom (40%), BASF/Wintershall (35%), E.ON (25%).
Lenders: Gazprombank, Intesa, BTMU, Credit Agricole, ING, Mizuho, Natixis, Societe
Generale, SMBC, UniCredit, BNP Paribas, WestLB, DZ Bank.
Lender legal: Linklaters
Sponsor legal: Herbert Smith
Sponsor financial advisers: Societe Generale and Russian Project Finance Bank
Insurance adviser: Willis.
Tax adviser: Ernst & Young
Reserves study: DeGolyer & Macnaughton, Model audit: PKF
Title:
Horizon closes financing for upstream projects. Project Finance & Infrastructure Finance,
17567866, Apr2012
Database:
Business Source Complete
Title:
Unlocking upstream finance. By: Cumming, Walter, Petroleum Economist, 0306395X,
Sep2011, Vol. 78, Issue 7
Database:
Business Source Complete
A company with a strong balance between production and growth potential will have a much
greater chance of securing investors' attention.
Exploration and production (E&P) firms need a well-managed output record, including stable
production spread across a number of assets. By contrast, a small E&P player with a focus
perhaps on one asset, so less critical mass, represents a greater risk, although each case is
considered on its merits.
In the oilfield-services sector, a strong and credible management team is also crucial; with the
business focus more on operational than capital expenditure; a diverse spread of business
streams; the potential for growth; and a focus on quality throughout the organisation.
There is a growing trend towards club deals in terms of reserve-based lending, where companies
negotiate with a number of lenders to create a group with a significant financial base. Such a
model can have significant benefits for banks, because they spread associated risks and increase
awareness of fellow club members. While for the company, such arrangements do not carry a fee
for underwriting the deal.
A disadvantage of this model is difficulty achieving synchronisation among all the club
members, which can lead to protracted processes.
Syndication: a popular model
Syndication is another popular model, although such deals are underwritten and are more
expensive than club arrangements. One concern with this type of arrangement is that the
company involved may have limited choice, and knowledge, of which banks join the syndicate.
A third option for smaller companies is a bi-lateral line arrangement, with a two-way link
between the client and the bank. The client can have separate agreements with a number of
banks, which also has significant benefits through spreading risk and separately negotiating price
and terms. A down side is that often bi-lateral partners each have separate agreements that must
be managed during the life of the loan.
The short-term fortunes of the oil and gas industry mirror those of the global economy, with an
emphasis on rebuilding confidence eroded over the previous two years. The strong outlook for
oil prices will drive investment, acquisitions and project development, as it helps to make the
financial models work and makes investment decisions clearer.
In the UK North Sea, the majors' programme of divestment will continue. Increased taxes will
create significant challenges, as buyers and sellers take stock and rerun investment models some planned projects have already been cancelled. But with a significant number of small and
medium-sized finds being made, good access to markets and a skilled workforce, the North Sea
remains attractive for investors.
North America can expect increased upstream investment opportunities, despite tougher
regulation post Deepwater Horizon. Questions will focus on the cost of change and firms will
look to form partnerships and joint ventures to mitigate risk and spread the increased costs.
Tighter US regulation, perhaps more in line with that in place in the North Sea, may price
smaller players out of the market and lead to increased M&A activity. In response, companies
must revisit risk and business strategies and perhaps change course to ensure success.
Barclays Corporate's approach to the sector has always been balanced in terms of lending well
and avoiding losses. Last year, the oil and gas team committed $1 billion to a mix of clients
worldwide, and 2011 has followed that successful trend.
Last year, the bank completed deals in areas such as the UK Continental Shelf, the US, AsiaPacific and the Middle East; with companies including Subsea 7, FMC Technologies, Ensco and
Wood Group. The finance was used for M&A, abandonment liabilities and corporate funding;
and includes bonds, revolving credit and term-loan facilities.
Increased lending
Lending has become tighter across some parts of the industry, but Barclays Corporate is
increasing lending significantly. There remains a rigorous credit and business case regime with a
robust due diligence process to navigate, although companies with good propositions and a
diverse portfolio remain attractive targets to lenders.
Trends suggest well-managed companies recognise this, which is particularly relevant as the
market heads towards 2012 and a potential wall of credit. At the height of the booming market in
2007, most companies took advantage of typically five-year debt and favourable pricing. Many
of these deals will need refinancing next year; coinciding with tighter bank regulations and
improving economic conditions.
The economic outlook for the oil and gas industry is generally improved: more available finance
will bring increased financial activity. Geopolitical uncertainty, new regulation and tax changes,
create specific challenges, but firms with flexibility in their business models will succeed. Those
unable to adapt may well find the year ahead difficult.
~~~~~~~~
By Walter Cumming
Title:
Galp seeking finance for Brazil upstream. Petroleum Economist, 0306395X, Apr2011,
Vol. 78, Issue 3
Database:
Business Source Complete
Title:
IFC to Invest $30Mn in Punj Lloyd Upstream. EmergingMarketsNOW, 10/10/2008
Database:
Business Source Complete