Natural Resources & Related Industries
Natexis Banques Populaires
FINANCING
THE
INDEPENDENTS
NOT AN OFFICIAL UNCTAD RECORD
Natural Resources & Related Industries
Framework – Part. 1
Independents in the new oil & gas marketIndependents 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
Natural Resources & Related Industries
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
EMERGING COUNTRIES: THE GROWTH RELAY
Natural Resources & Related Industries
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
Natural Resources & Related Industries
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
Natural Resources & Related Industries
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 independentsAdvising & financing the independents
A tailor-made approach at each step of Independent’s life:
Exploration Financing Development & Acquisitions
Natural Resources & Related Industries
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
Natural Resources & Related Industries
Advising & Financing the IndependantsProject stages
Exploration phase
High risk / High reward
Investors’ role
PRIVATE PLACEMENTPARTNERSHIP
BRIDGE FINANCING RESERVE BASEDLENDING
IPOFarm-Out
Before First Oil
Development risk
Investors / Banks’ role
After First Oil
Operational risk
Banks’ role
Development phases Reserves are identified
Natural Resources & Related Industries
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
Natural Resources & Related Industries
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 ?
Natural Resources & Related Industries
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
Natural Resources & Related Industries
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
Natural Resources & Related Industries
Advising & Financing the IndependentsRBL: A Borrowing 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
Natural Resources & Related Industries
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
Natural Resources & Related Industries
Advising & Financing the IndependentsRBL: Typical Junior structure
STRETCHIdentical 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)
MEZZANINEIdentical 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
Natural Resources & Related Industries
EQUITY
Advising & Financing the IndependentsRBL: Typical structure
DevelopmentWorking Capital Acquisition
SENIOR
STRETCH
MEZZ.
SENIOR
STRETCH
MEZZ.
ASSET VALUE
50%
50%
+7.5%
+7.5%35%
7.5%
7.5%
Banks finance up to 2/3rd of asset value
Natural Resources & Related Industries
Conclusion
Your Banker – Your Partner
Technical & Legal Advising
Introduction to Reliable Professionals & Partners
Raising Funds
Financing Development & Acquisitions
Natural Resources & Related Industries
THANK YOU
Natexis – Natural Resources & Related Industries45, rue Saint Dominique75007 PARISphone : + 33 (0) 1 58 19 30 19Fax : + 33 (0) 1 58 19 38 89
Laure PIRONNEAU
Head of Africa & Middle-East
e-mail : [email protected] : + 33 (0) 1 58 19 28 79
Pascal NICODEME
RBL Team
e-mail : [email protected] : + 33 (0) 1 58 19 33 41
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