Industry Overview/Qualitative and Quantitative Risk Analysis
Industry Overview/Qualitative and Quantitative Risk Analysis:
- Structure of the international petroleum industry:
- From upstream to downstream - the hydrocarbon value chain
- Upstream – exploration, development and production
- Refining – from raw material to end-product
- Pipelines – transmission and distribution
- Liquefied natural gas – a fuel of the future
- Petchem – beyond the burner-tip
- Different risk/reward objectives of sponsors and lenders
- Structural & pricing drivers in oil & gas lending:
- Country/political risk
- Sponsors
- Reservoir/reserves
- Technology and construction/completion
- Salesofftake
- Operation & maintenance
- Abandonment/decommissioning
- Environmental/regulatory
- Quantitative risk analysis:
- Key ratios – loan life and project life covers
- Balancing equity and debt
- Features and design of oil and gas models
- Developing an appropriate base case – setting “price decks” and other economic/technical parameters
- Sensitivity analysis:
- Choosing/calibrating sensitivities
- Getting to loan value
Understanding Upstream Oil & Gas Financing:
- Reservoirs & reserves – a technical grounding:
- From exploration through appraisal to development and production
- Nature of hydrocarbon reservoirs
- Estimating volumes
- Reserve classification – proven/probable/possible: 1P/2P/3P
- Reserves for banking purposes
- Due diligence and consultants’ reports
- Field development finance in the early days of the north sea
- Growth of the independent sector
- Emergence of the borrowing base as the tool of choice
- European and North American borrowing bases
- Structural features of the European borrowing base, especially:
- Balancing development and producing assets
- Redetermination practices – setting technical and economic parameters
- Balancing OECD and emerging market assets
- Adding/removing assets
- Hedging as revenue protection and debt support
- Treatment of abandonment/letters of credit for abandonment
- Payment waterfalls/account structures
- Typical and variant distribution controls, reps& warranties, undertakings, events of default.
- The “War Stories” in north sea single-field finance– examination of the deals that failed
- Recent trends in north sea finance:
- The “New Wave” of independents
- The move by larger independents to corporate borrowing
- The new independents’ needs and the banks’ response:
- Single-field financing returns
- “Stretched” borrowing bases
- Subordinated/mezzanine products
Getting to Grips with Refinery Finance:
- Refinery operations – from topping refineries to complex crackers
- Greenfield or expansion financing?
- Cashflow volatility – the key risk for lenders
- Operational mitigation of volatility risk:
- “Geographical” margin protection
- Tolling-based structures
- Hedging to reduce volatility
- Debt structuring to mitigate lender risk, including:
- Debt/equity balancing
- Repayment profile optimisation
- Cash sweeps
- Distribution controls and information/other covenants
- Refinery market analysis for lenders:
- Choosing consultants
- Scope of work for due diligence studies
- Modelling/sizing debt for refineries
- “Where has it gone wrong?” – a somewhat chequered history
Oil & Gas Transmission & Distribution Lending:
- Trunk pipelines and distribution networks – very different animals
- Oil and gas transmission pipelines – high fixed cost/multipartner undertakings:
- Key risk factors – especially upstream supply issues, construction contracts and sale/offtake contracts
- Balancing the interests of private and public sector players
- Environmental/social issues – a “make-or-break” factor
- Analysis of recent oil/gas pipeline financings
- Gas storage & distribution finance:
- Liberalised/regulated gas distribution has increased financing needs
- Gas storage in depleted fields and salt caverns - developing tailored financing packages
- Funding the acquisition and build-out of gas distribution networks
- Financing gas metering
- The role of regulation and its impact on financing
Liquefied Natural Gas Finance:
- The growth of the LNG debt market
- LNG liquefaction finance:
- Risk profile of liquefaction projects, especially:
- Sponsor/equity issues
- Construction contracts – structure and risk allocation
- LNG sale contracts
- Arabian Gulf LNG projects – a detailed comparison:
- Typical debt structures
- Development of structures over time
- LNG regas finance:
- Structural drivers – especially supply, market, regulatory and regulatory issues
- Features of recent regas financings in:
- UK & Europe
- USA
- India
- LNG ship finance:
- The LNG shipping industry
- Corporate vs. project debt
- Structural drivers in project-based LNG vessel financing
- Comparison of project debt structures
- Recent trends:
- Financing of integrated LNG chains
- Changing downstream markets and trading patterns
- Increasing flexibility in LNG sales and financing contracts
Other Downstream Finance – Petchem and Gas-to-Liquids:
- The Petchem “flowchart” – from gas/naphtha-based feedstocks to end-products
- The Middle-Eastern petrochemical wave – adding value to domestic gas resources:
- Risk profile of petrochemical projects – especially:
- Construction – issues and contractual structures
- Technology – bankability and licensing
- Feedstocks – volume, price and quality factors
- Sales/Offtake – agency/licensing issues
- Financing gas separation & treatment plants – the first step
- Polyolefin projects – financing crackers and PE/PP plants
- Increasing sophistication – aromatics and beyond
- Gas-to-Liquids – financing clean diesel projects