Energy Finance School: Upstream, Midstream & Downstream Oil, Gas & LNG Projects

By attending this highly interactive and practical 5-day training school you will: Gain a better understanding of oil and gas markets and how oil and gas projects are financed Gain a better understanding of the current trends in energy project finance Review the technical evaluations of upstream and downstream projects Understand how the technical issues of energy projects are translated into financial and credit risks Understand the finer aspects of financial modelling by identifying and quantifying the major risks that impact a project’s cash flow generation capabilities Gain a better understanding of credit structuring techniques, so as to effectively mitigate the credit risks of an energy project Review the finer aspects of legal documentation, with legal documentation techniques and tips to help you properly reflect a credit structure in the legal contract Featuring 3–individually bookable modules: Upstream development & production Mid-stream pipelines & LNG projects Downstream oil refineries & petrochemical plants Including: 16 key industry case studies to improve your understanding Course background & methodology The course will enable participants with skills 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. Each section will be covered briefly as a module in a traditional class style, and the real learning experience will be found in the exercises within each module. Suggested solutions to each exercise will be provided and discussed. Supporting materials will be available for further in-depth learning.
Day 1 Module 1: Upstream Development & Production Overview of the oil and gas sector; the lending markets; recent developments in lending; overview of the credit process; identifying and mitigating credit risks 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 evolution of fiscal terms (e.g. PSC’s, concessions, service agreements etc.) and the emerging dominance of the national oil company 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 How debt is used to manage cash flow Recent developments in lending Case study 1: Each team will review an upstream oil and gas company, identify its financing needs and propose an appropriate financing solution. Overview of the credit process Initial deal review Proposal Due diligence Credit approval Term sheet Legal documentation Deal closing Deal monitoring Case study 2: Each team will prepare an initial deal review of an independent oil & gas company. Findings and recommendations will be presented to the mock credit committee. Converting technical risks into credit risks What can the financial analyst do before calling a technical engineer? Reviewing the reserve report Assessing the development plan Credit risk mitigation strategies Case study 3: Each team will review the technical report for an oil field development, identify technical risks and propose credit risk mitigation strategies. Identifying and mitigating risks Management and operating & capital strategies 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 4: Each team to undertake a credit analysis and prepare a credit application for an oil and gas company, which will be presented to the mock credit committee. Day 2 Financial modelling in excel; credit structuring including covenants and pricing; legally documenting the transaction; high leverage situations; mezzanine debt product; overview of downstream O&G project financing and the importance of upstream knowledge 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. special purpose vehicles (SPVs) Country risk credit considerations Assessing the legal environment and political risks, plus risk mitigation strategies Syndication strategies in the current credit climate Case study 5: Selecting a country/region-mitigating country risk and lender’s ability to perfect security over collateral; syndication considerations. Each team will present a credit analysis that will address country risk/political risk and outline a syndication strategy. Legally documenting the transaction Overview of a legal contract Perfecting security Subordination and inter-creditor agreements Project/field agreements Identifying credit risks and risk mitigation Case study 6: Each team will review excerpts of a draft credit agreement and identity any credit documentation issues and propose risk mitigation strategies. High leverage situations Credit risks: exploration vs. development vs. production Senior debt vs. mezzanine debt vs. bonds “Stretch” tranches Lender issues and risk mitigation Mezzanine debt product Increasing debt capacity: oil price deck; reserve profile; cover ratios; reserve tail requirement Pricing Warrants Syndication considerations Case study 7: Each team will review the economics of an oil development project and determine the debt capacity. An appropriate finance package will be recommended by each team. 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 Summary and close for the upstream O&G finance section Day 3 Module 2: Mid-stream Pipelines & LNG projects Overview of global midstream energy markets; overview of the global LNG market and its impact on regional gas markets; technical teview for a mid-stream project; LNG project: financial modelling in Excel Overview of global midstream energy markets Overview of the business development and credit process - why does country risk matter? Global and regional oil and gas production Geo-political influence on midstream energy projects, how can this mitigate credit risk? Major global oil and gas production projects in development Locations of global refining capacity Transportation the “lynchpin” in the oil & gas value chain Overview of the global LNG market World/regional gas consumption World/regional gas production Transportation of gas - how LNG globalised a local commodity Growth in LNG investment and the collapse of gas prices – future concerns and opportunities Review of LNG projects in development and proposed projects Credit analysis: LNG project finance Quantitative risks and mitigation strategies Qualitative risks and mitigation strategies Case study 8: Credit structuring. Each team will analyse a transaction and develop an appropriate credit structure to mitigate credit risks. Expert feedback will be received. Technical review for a midstream project Why is the technical analysis so important in assessing mid-stream oil and gas projects? Reviewing the reserve report of the oil or gas fields that will supply the pipeline or LNG project Identifying credit risks and mitigation strategies Case study 9: Qatar Gas II – Whose risk is it anyway? Each team to undertake a credit analysis of the Qatar Gas II project, with expert feedback provided on candidate responses. LNG project finance: financial modelling in Excel Creating financial models for LNG financing Earnings vs. cash flow Debt amortisation schedule Assumptions Ratio analysis Case study 10: Each team will develop a financial model for a LNG financing and assess the strengths and weaknesses of the project. Each team will present their findings and propose whether to proceed or decline the transaction. Expert feedback will be provided. Day 4 Module 3: Downstream Oil Refineries & Petrochemical Plants Overview of the downstream sector; the bank lending markets, including project finance and working capital facilities; Overview of a downstream oil and gas project financing, including a review of recent trends. Overview of the downstream sector Oil and gas demand fundamentals: who buys the oil and gas? Review of regional demand for oil and gas Global concentrations of oil refineries and petrochemical production The economic cycle and the boom, bust nature of the downstream sector; the trend is the lender’s friend Overview of the working capital and capital expenditure requirements of a refinery and a petrochemical producer: how is debt used to manage cash flow? Case study 11: Team exercise in identifying the working capital and capital expenditure financing needs of a petrochemical producer. Expert feed back provided. The bank lending markets Project finance vs. balance sheet lending Working capital facilities and asset based lending Credit risk vs. equity risk Recent developments in lending Country risk credit considerations Assessing the legal environment and political risks, plus risk mitigation strategies Syndication strategies in the current credit climate Case study 12: Selecting a country/region: mitigating country risk and lender’s ability to perfect security over collateral; syndication considerations. Each team will present a credit analysis that will address country risk/political risk and outline a syndication strategy. Expert feedback provided. Overview of a downstream oil and gas project financing Typical project finance structures When is a project finance structure the preferred choice? Understanding the objectives of parties involved in the project financing: - Sponsor / borrower - EPC contractors - Government agencies - Lender Institutional investors Review of recent down-stream oil and gas project financings Credit risk mitigation strategies in project financing Day 5 Overview of the credit process; technical reviews: identifying credit risks and risk mitigation strategies; credit analysis, including qualitative factors; financial modelling, including developing assumptions and stress testing. Legally documenting the credit facility; the finer aspects of legal documentation and ensuring the bank approved term sheet is reflected in the legal contract Overview of the credit process Initial deal review Drafting a proposal Due diligence Credit application Credit approval Term sheet Legal documentation Deal closing Deal monitoring Case study 13: Each team to undertake a credit analysis and prepare a credit application for a working capital facility for a petrochemical producer, which will be presented to the simulated credit committee. Expert feedback will be received. Technical reviews: identifying credit risks and mitigation strategies; credit analysis Why is the technical analysis so important in assessing downstream oil and gas projects? Identifying credit risks and risk mitigation strategies Credit analysis Coverage ratio calculations Reserve accounts Qualitative credit risk factors Financial modelling; assumptions, including stress testing assumptions Creating a financial model for a working capital financing Earnings vs. cash flow Debt amortisation schedule Assumptions, including stress testing assumptions Ratio analysis Case study 14: Each team will develop a financial model for a working capital financing and assess the strengths and weaknesses of the project. Each team will present findings and propose whether to proceed or decline the transaction. Expert feedback will be provided. Legally documenting the transaction Overview of a legal contract Legal jurisdiction Perfecting security Subordination and inter-creditor agreements Project/field agreements Risk mitigation Legally documenting the credit facility Overview of a legal contract Legal jurisdiction Perfecting senior security positions over assets; fixed and floating charges Subordination and inter-creditor agreements Project agreements Typical credit documentation issues and risk mitigation strategies. Case study 15: Each team will review excerpts of a draft credit agreement and identify any credit documentation issues and propose risk mitigation strategies. Expert feedback will be provided. The finer aspects of legally documenting the credit facility: ensuring the bank approved term sheet is reflected in the legal contract Covenants, including cover ratios Post-closing credit facility monitoring considerations Lending to an operating company vs. SPV Syndication considerations Case study 16: Each team will review excerpts of a draft credit agreement and compare it with the bank approved facility term sheet. Any differences between the draft credit agreement and the term sheet will be identified and solutions proposed. Expert feedback will be provided. Course summary and close