Oil & Gas Project Finance

Euromoney Learning Solutions

How long?

  • 3 days
  • in person

Euromoney Learning Solutions

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Who should attend

  • Project Finance Managers
  • Credit Managers
  • Securities Managers
  • Corporate Banking Officers
  • Financial Analysts
  • Strategic Planners
  • Senior Executives
  • Legal Advisors
  • Business Analysts
  • Consultants

About the course

In today's volatile energy environment financing projects is uniquely challenging. It is ever more important to understand how suitable financial structures for oil, gas and electricity projects are created as even the most carefully structured deals can face difficulties in attracting sufficient debt, equity or other funding from international or local investors.

Participants in this program will learn to structure projects in creative ways to attract funding from banks, the bond market, equipment providers and public and private equity. They will look at approaches to facility upgrades and green field projects in the oil gas and electricity sectors. They will analyse deals to develop robust security packages, as well as learning to apply many tools and techniques of quantitative financial analysis. In hands on sessions employing excel models they will assess project debt capacity, return on investment, and other metrics common to attractive deals.

Besides direct funding, in many transactions, credit enhancement techniques can also be very important. Thus traditional Export Credit Agency, Multi- and Bi-lateral Agency support, as well as tailored private sector political and commercial shifting mechanisms and programs are explained in detail. Cases and examples of projects from Africa, the Middle East, and elsewhere around the world are used throughout this program to ensure understanding and application of concepts.

Active course participation is encouraged to ensure understanding and reinforce concepts. Cases require evening reading. Participants will be provided with complete lecture notes, cases, and selected readings to serve as a reference after the sessions are completed.

Key Learning Topics

  • Accessing project funding in today's challenging markets
  • Structuring large oil and gas field development projects
  • Financing pipelines, oil rigs, platforms, and other infrastructure
  • LNG and fertilizer plants
  • Power projects including 'green' energy deals
  • Carbon credits
  • Developing pro forma estimates and cashflow models
  • Working with banks and understanding key legal risks in projects Official providers of funds and credit support (export credit agencies, development banks and others)
  • Managing commodity price volatility in energy deals

Agenda

Day 1

Themes: Energy Markets; Varying Approaches to Financing Different Types of Projects; Qualitative and Quantitative Analysis; Cash Flow Modeling

Oil, Gas and Energy Project Finance

  • Today’s market and energy transactions
  • Structuring and sources of finance
  • Limited recourse vs. balance sheet deals
  • Types of projects and their comparative complexity
  • Identifying and allocating risks
  • Pipelines
  • Field development and platforms
  • Production facilities
  • Refineries and petrochemical plants
  • LNG Facilities
  • Power Plants
  • Key players and their roles
  • Steps/timeline in a project financing

Case Example: Pipeline Project Finance

Sources of Finance: Financing Checklist

  • Domestic Borrowing
  • Loans from International Banks
  • International Capital Markets: Eurobonds, Private Placements
  • Export Credit Support for Loans and Bonds
  • Specialized Agencies: IFC and others
  • Leasing
  • Equity from Project Sponsors and Others
  • Derivatives Usage

Risk Identification and Allocation Building a Risk Matrix

  • Risk allocation between sponsors, creditors and others
  • Technology and construction/completion
  • Reservoir/reserves risks
  • Feedstock risk
  • Sales and off-take, operation and maintenance
  • Abandonment/decommissioning
  • Environmental considerations
  • Political risk and regulatory issues

Quantitative Analysis: Using Proforma Cashflow Models

  • Approaches to modeling for oil and gas transactions
  • Developing an appropriate base case / running sensitivities and scenarios
  • Focus of the debt providers: DSCR, loan life, and other key ratios
  • Sizing debt in different types of projects
  • Debt to equity balances
  • Sponsor and key stakeholder perspectives
  • Measures of investor return

Case Study: Financing an Ammonia Plant

Day 2

Themes: Legal issues to Consider in Accessing Finance; Bank Markets; Credit Enhancement; Upstream Oil and Gas Field Development; Reserve-based Facilities; Refineries, Transportation, Shipping; Power Project Financing

Sources of Finance

  • Club loans and bank syndicates
  • Pricing, flexibility, timing in the sector and today
  • What security do banks want?
  • Offshore accounts and trustees
  • Mortgages on fixed assets /contract assignments
  • Capital markets and examples of projects
  • Private placements, rule 144A and eurobond financing
  • Swap requirements and other derivatives usage:
  • Commodity, interest rate and currency hedging
  • Recent structures and examples

Credit Enhancement: Export Credit Agencies (ECAs)

  • Official guarantees, insurance and funding programs for energy transactions
  • Incentives in ECA programs: which are most popular today?
  • Costs and availability

Islamic Financing Alternatives for Energy Projects

  • Structures: Istisna, Ijara, Sukuk
  • Examples: Petro-Rabigh Saudi Arabia, other

Upstream Oil and Gas: Oil and Gas Exploration, Development and Production

  • Oil production: process depletion and enhanced recovery
  • Major systems and types of drilling equipment
  • Offshore oil platforms in shallow and deep water

Reserve-Based Finance

  • Development finance vs. reserve-based lending and borrowing bases
  • Mezzanine funding
  • Emergence of “North Sea” structures and reserve categories (P1, P2, P3)
  • Common measures: (Loan Life Cover Ratio (LLCR), Project Life Cover Ratio (PLCR), Reserve Tail

Case Study: Financing a Condensate Field Development

“Midstream” and Refineries

  • Understanding the process: from topping refineries to complex crackers
  • Financing: greenfield vs. expansion
  • Refinery market analysis:
  • Cash flow volatility and operational risk mitigation
  • Tolling structures
  • Distribution controls and Information/other covenants
  • Examples: Colombia, Vietnam

Biofuels

  • Comparative costs and “grid parity”
  • Government support schemes
  • Biodiesel and ethanol

Oil and Gas Transportation, Shipping and Storage

  • Logistics: pipelines, shipping, storage
  • Crude gathering and transmission
  • Refined products transmission lines
  • Tanks, floating storage and caverns
  • Types of tankers

AFRA classes (average freight weight assessment)

  • ULCC to tanker lightering

Case Study: Rig Finance

Power Project Financing

  • Fragmentation of electricity sector into Gencos, Transcos and Discos
  • Contracted sales and PPAs, merchant plants and tolling arrangements
  • Gas and other fuel sources for thermal power plants
  • Peakers vs. base-load facilities and power dispatch curves
  • Rating agencies' analytical model

Case Study: Financing a Gas-Fired Power Plant

Day 3

Themes: Cashflow Modeling Workshop

The program’s final day integrates discussion of the oil and gas sector with cash flow modeling in workshop fashion. Using excel software, participants create a model for an LNG Plant suitable for examining project debt capacity as well as return on investment.

Overview: Oil, Gas and LNG Market Today

  • Market Trends and Projects
  • Case Example: Ras Laffan LNG
  • LNG Sales Agreement
  • Gas Payments and Royalties
  • Construction Undertakings
  • Financing Choices – Banks, ECAs and the Bond Market
  • Equity Participation

Structuring a Cashflow Model and Organizing the Data

  • Developing the Assumptions Page
  • Construction Costs and Timing
  • Operating Cost, Plant Capacity Usage, Fixed and Variable Costs
  • Reinvestment, Plant Expansion, Productivity Shifts

Developing the Profit and Loss and Balance Sheet

  • Factoring in Reserves
  • Considering Currencies
  • Tax Calculations

Financing Section

  • Equity First or Pro Rata
  • Manually Designed Equity Subscription
  • Draw-down of Debt Linked to Specific Contracts or Expenditures or in a Hierarchy

Ratios and Sensitivity Analysis: Objectives and Limitations

  • Measuring Debt Capacity and Investor Return
  • Using Modeling Output for Initial Project Vetting
  • Supporting on-going Negotiations

Summary and Wrap-up of Oil and Gas Project Structuring and Modeling

Experts

Meg Osius

Ms. Osius designs and delivers executive level training sessions as well as providing consulting services to a wide variety of organizations worldwide. Specializing in international project finance, capital markets, and risk management, she works with corporate investors, private and development ...

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Oil & Gas Project Finance at Euromoney Learning Solutions

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