Natural Resources & Related Industries Natexis Banques Populaires FINANCING THE INDEPENDENTS NOT AN OFFICIAL UNCTAD RECORD

Natural Resources & Related Industries

Natexis Banques Populaires

FINANCING

THE

INDEPENDENTS

NOT AN OFFICIAL UNCTAD RECORD


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


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


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


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


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


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


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


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


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 ?


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


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


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


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


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


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


Conclusion

Your Banker – Your Partner

Technical & Legal Advising

Introduction to Reliable Professionals & Partners

Raising Funds

Financing Development & Acquisitions


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

Documents

Natural Resources & Related Industries Natexis Banques Populaires FINANCING THE INDEPENDENTS NOT AN OFFICIAL UNCTAD RECORD