In the current landscape of heightened environmental and social consciousness, upstream oil and gas companies face significant challenges in achieving favorable refinancing for their existing credit facilities. These challenges are compounded by the recent volatility in the debt markets and instability in commodity prices, making it even harder for CFO and treasury teams to find favorable lenders.
A few implications of failing to secure the best possible terms during credit facility refinancing include:
- Higher interest costs
- Increased debt burden
- Restrictive negative covenants
These consequences can strain an upstream operator’s ability to operate effectively and return capital to shareholders.
Refinancing in the dark
The refinancing process is plagued with data sprawl and obscured information.
- The process requires the use of industry-specific information that is not commonly documented by many financial data providers.
- Modern upstream credit facility agreements include covenants and terms such as production volume targets and ESG metrics that significantly impact debt pricing and interest rates, but often remain hidden deep within the agreements.
Transparent capital sourcing solution
It is critical to expose this data from the shadows, so treasury teams can have all the information and insights needed to identify the best refinancing terms relative to their peers. Enverus Capitalize provides a comprehensive dataset and industry-specific insights that treasury teams can leverage to streamline the lender identification and negotiation process. The platform’s actionable insights are instrumental in securing favorable refinancing terms, especially given the current market conditions and variables that influence refinancing decisions.
Credit facility A redetermination example
Let’s consider the case of a theoretical treasury team at an upstream operator in the process of extending their credit facility maturing in 18 months, leveraging Enverus Capitalize. First, the team identifies the refinancing terms, such as interest rates and operational covenants of their peers, and uncovers which lenders were actively increasing exposure to their peers.
Next, once they are armed with this information, they can work closely with these lenders to negotiate the most optimal credit agreement and set up the most business-friendly bank group.
Finally, the team confidently secures their refinancing agreements with a clear view of the terms and covenants.
Conclusion
Enverus Capitalize plays a crucial role for treasury teams hoping to navigate the opaque and intricate landscape of credit facility refinancing. By helping treasury teams avoid terms and conditions that lead to negative investor perceptions, future covenant violations and credit rating downgrades, Enverus Capitalize helps maximize the potential for increased returns to shareholders.
