$270million Refinancing of Oil Field

The crash in crude oil prices from mid-2014 signaled the onset economic recession for most of the world’s oil producing nations. It was an especially turbulent time, particularly for industry players in countries such as Nigeria. Our client, an indigenous oil exploration and production group, was caught in the challenging time. With oil prices crashing, it’s debt funders – local banks – turned on pressures for pay-down on the facility. In addition, the lenders had lien on proceeds of crude sales. The resultant restriction on cashflow to the company began to stifle operations.

The Client engaged Eczellon to structure and execute a refinancing of the facility. The mandate included seeking additional financing for the development of a new field.

Challenges

There were challenges which, although not peculiar to the client but to the industry at the time, reduced the chances of successfully sourcing new capital. The low oil prices implied that the valuation of reserves had dipped, and significantly reducing asset coverage demanded lenders. More poignantly, the instability of oil prices significantly increased risk profile of new debt on oil assets.

Solution - Our Approach

Eczellon, on behalf of the client, engaged existing lenders as well as arranged a new product offtake agreement with a major International Oil Company, which as part of the deal agreed to provide up to $270million debt refinancing.

Result

The refinancing exercise was successfully executed. The client was able to continue operations and survive the difficult period and increased its production through enhanced re-investment of its cashflow. Presently, with rally in oil prices and increased production, the client is reaping dividends.

Eczellon is quite resourceful. While it should be a standard, we found refreshing that a firm can be upfront with what they cannot deliver, and be totally committed once they promise

Tayo Obasanya
Corporate Finance & Strategy, Amni Group
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