Euromoney Energy Training

A 4-day programme featuring:

• Overview of the modern petroleum industry
• Recent developments in upstream oil and gas lending
• Overview of the credit process
• Identifying credit risks
• Financial modelling, including incorporating credit risks into the financial model
• Credit structuring, including covenants and pricing
• Legally documenting the credit transaction
• High Leverage Situations
• Mezzanine debt product for oil and gas companies

Includes case studies on:

• Generic independent offshore upstream oil and gas company
• Generic independent onshore upstream oil and gas company
• Essar Oil
• ExxonMobil
• Qatar Gas II

Course Overview

The principal aim of the course is to enable participants to identify and analyse prospective borrowers, structure credit facilities, and prepare credit applications for formal presentation and approval by bank credit committees. These skills can be used by the origination teams and credit teams of lenders and to support organisations which run or sponsor projects. This will be done by reviewing best practice in originating new credit transactions, identifying and mitigating credit risk, financial modelling including sensitivity analysis, credit structuring and legally documenting credit transactions.

Course Methodology

The learning methods used are practical, as practice of newly-learned techniques enables a deeper and more effective building of skills. Each section will be covered briefly as a module in a traditional class style, but the real learning experience will be found in the exercises within each module. Suggested solutions to each exercise will be provided and discussed, and participants will be encouraged to review their work independently. As the time available is limited, and the needs of the participants will vary, each section will not be covered in depth, but supporting materials will be available for further in-depth learning according to participants' own needs.

DAY 1

Overview of the oil and gas sector; the lending markets; recent developments in lending; overview of the credit process

Overview of the oil and gas sector

• Brief history of the modern petroleum industry
• Oil: 20th century superpower
• World oil and gas reserves and consumption

The bank lending markets

• Understanding the origins of the established oil & gas lenders and opportunities for new lenders
• Common types of lending: reserve based lending, mezzanine debt, bonds
• Credit risk vs. equity risk
• Recent developments in lending

Overview of the credit process

• Initial deal review
• Proposal
• Due diligence
• Credit approval
• Term sheet
• Legal documentation
• Deal closing
• Deal monitoring

Case study: initial deal review of an independent oil & gas company

DAY 2

Technical review; gualitative analysis; identifying and mitigating credit risks

Technical review

• What can the financial analyst do before calling a technical engineer?
• Reviewing the reserve report
• Assessing the development plan

Company specific

• Management
• Operating and capital strategies
• Equity sponsor
• Borrower’s ability to access capital identifying and mitigating risks

Identifying and mitigating risks

• Development risk, including government approvals
• Reserve risk
• Commodity price risk
• Environmental risk
• Insurance risk
• Lender’s ability to perfect security over borrowing base assets
• Corporate structure of borrower

Case study: onshore development project; offshore development projection

DAY 3

Modelling in excel; credit structuring including covenants and pricing; legally documenting the transaction

Modelling in Excel

• Creating an upstream oil & gas projection model
• Earnings vs. cash flow
• Debt amortisation schedule
• Assumptions
• Using derivative products to hedge price risk and enhance debt capacity
• Ratio analysis

Credit structuring

• Security over borrowing base assets and non-borrowing base assets
• covenants, including cover ratios
• lending to an operating company vs. SPV
• Syndication considerations

Legally documenting the transaction

• Overview of a legal contract
• Legal jurisdiction
• Perfecting security
• Subordination and inter-creditor agreements
• Project/field agreements
• Risk mitigation

Case study: onshore development project; offshore development projection

DAY 4

High leverage situations; mezzanine debt product; overview of oil & gas finance: downstream project financing

High leverage situations

• Credit risks: exploration vs. development vs. production
• Senior debt vs. mezzanine debt vs. bonds
• “Stretch” tranches
• Risk mitigation

Mezzanine debt product

• Increasing debt capacity: oil price deck; reserve profile; cover ratios; reserve tail requirement
• Pricing
• Warrants
• Syndication considerations

Overview of oil & gas finance: downstream project finance

• Why upstream knowledge is needed to better understand downstream project finance
• Financing oil refineries
• Financing LNG projects

Case studies: Tullow Oil Plc, Premier Oil Plc

Summary and close

• John Aggelakos

  John Aggelakos has over 20 years banking experience in the oil and gas sector. John has an Honours BA degree from University of Toronto. John qualified as a Chartered Accountant at KPMG in Canada and Ireland before moving into Banking, where he has held key positions at BMO Nesbitt Burns, GMAC Commercial Finance, West LB and Bank of Scotland.
  
  John’s assignments have included providing finance or acting as financial advisor to: ExxonMobil in Nigeria, Essar Global, and Qatar Gas II and Qatar Gas IV LNG projects. John now works as an independent consultant and advises banks and industry on energy issues.

  Courses run by this instructor

  • Energy Finance School: Upstream, Midstream & Downstream Oil, Gas & LNG Projects - London
  • 2012 Energy School - Upstream, Midstream & Downstream - Hong Kong

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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