Transcript Financing of the Independents

Natexis Banques Populaires
FINANCING
NOT AN OFFICIAL UNCTAD RECORD
THE
INDEPENDENTS
Natural Resources & Related Industries
Framework – Part. 1
 Independents in the new oil & gas market
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Opportunities in emerging markets
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Emerging countries: a growth relay
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Expansion of oil independents
Key challenges to be faced by Independents
 Advising & financing the independents
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Exploration

Financing Development & Acquisitions
Natural Resources & Related Industries
Independents in the new oil & gas Market
Opportunities in Emerging Countries
 Current production > New reserves discovery
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Traditional assets are mature (North Sea, Gulf of
Mexico…)
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Fierce competition and high production costs
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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 Market
Emerging Countries: The Growth Relay
 Promising zones
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Wide range of attractive & still unexploited
reserves
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Exploration / Early production phase assets
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Mature fields no longer profitable
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Attractive economic & fiscal environment
 High potential assets
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Favourable price context
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Improvement of oil technologies
Natural Resources & Related Industries
Independents in the new oil & gas Market
Expansion of Oil Independants
 New players face various problematics:
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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
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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 independents
A tailor-made approach at each step of Independent’s life:

Exploration

Financing Development & Acquisitions
Natural Resources & Related Industries
Advising & Financing the Independents
Benefiting from our expertise
 We can assist implementing Independent’s
strategy:
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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 Independants
Project stages
 Exploration
 Development phases
phase
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Reserves are identified
 Before First Oil
 After First Oil
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High risk /
High reward
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Development risk
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Operational risk
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Investors’ role
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Investors / Banks’
role
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Banks’ role
IPO
Farm-Out
PRIVATE PLACEMENT
PARTNERSHIP
BRIDGE FINANCING
Natural Resources & Related Industries
RESERVE BASED
LENDING
Advising & Financing the Independents
What is RBL ?
 RBL: a US-Born Financial Product

Methodology derived from standard transactions

Valuation of assets

Lending backed to physical assets generating cash
(producing field)
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Benefits from well-established legal systems
Natural Resources & Related Industries
Borrowing Base
Advising & Financing the Independents
Why RBL ? (1/2)
 Traditional Corporate Lending
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Non significant balance sheet and P&L accounts
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Corporate banks uncomfortable with emerging countries
 Pre-Export Financing
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Small production (PDP): facility insufficient to fund asset
development
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Financing long term investments with short term credit ?
Natural Resources & Related Industries
Advising & Financing the Independents
Why RBL ? (2/2)
 Project Finance
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Quality of the Sponsor
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Lack of flexibility
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Development Risk (full asset development)
 New Equity
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Cost
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Dilution of existing shareholders
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Time schedule
Natural Resources & Related Industries
Advising & Financing the Independents
RBL: A Structured Instrument adapted to Independents
 Why is it adapted to Independents ?
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Based on asset cash flows, not on corporate CF
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Country risk allowable even with limited asset
portfolio
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Tailored to financing needs and company
development
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Structured on purpose: Senior debt, Stretch
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Allows risk taking without equity dilution
Natural Resources & Related Industries
Advising & Financing the Independents
RBL: 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:
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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 Independents
RBL: Typical Senior structure
 BRIDGE
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Facility:
Purpose:
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Tenor:
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Amount fixed on a case by case basis
Exploration and development of the existing
reserve base and acquisition
3 to 6 months, until repaid by Senior facility
 SENIOR FACILITY
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Facility:
Borrowing Base:
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Purpose:
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Tenor:
Collateral:
Collection Account :
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Amortization:
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Fully revolving credit facility
Based on Proven reserves
(North sea : Proven + Probable)
Working capital, exploration and development
of the existing reserve base and acquisition
3 to 8 years
Charge on interests in oil & gas properties
Domiciliation of revenues at the agent’s
counters
According to cash flow ratios
Natural Resources & Related Industries
Advising & Financing the Independents
RBL: Typical Junior structure
 STRETCH
Identical to senior except :
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Facility:
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Purpose:
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Amortization:
Up to additional $50 million
(subordinated credit facility)
Development of the existing reserve base and
acquisition
According to cash flow ratios
(less restrictive than senior tranche)
 MEZZANINE
Identical to senior except :
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Facility:
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Purpose:
Tenor:
Amortization:
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Amount fixed on a case by case basis
(subordinated credit facility)
Acquisition
Senior facility Tenor + 1 day
Bullet
Natural Resources & Related Industries
Advising & Financing the Independents
RBL: Typical structure
Banks finance up to 2/3rd of asset value
MEZZ.
+7.5%
STRETCH
+7.5%
EQUITY
35%
50%
ASSET
VALUE
MEZZ.
7.5%
STRETCH
7.5%
SENIOR
50%
Development
Working Capital
Natural Resources & Related Industries
SENIOR
Acquisition
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 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
 Pascal NICODEME
Head of Africa & Middle-East
RBL Team
e-mail : [email protected]
phone : + 33 (0) 1 58 19 28 79
e-mail : [email protected]
phone : + 33 (0) 1 58 19 33 41
Natural Resources & Related Industries