BAKU, Azerbaijan, Dec. 23
By Leman Zeynalova – Trend:
Bond use to finance oil and gas companies in emerging markets as well as developed ones will increase in 2020, Trend reports citing Ashurst LLP, a multinational law firm headquartered in London, United Kingdom.
Ashurst said in its outlook for 2020 that a number of upstream oil and gas companies and oil field services companies will need to refinance at least part of their borrowings during 2020.
“Debt structures have become more complicated, with companies often employing multiple sources of debt financing in their capital structures, using more diverse funders than the traditional core oil and gas banks,” reads the report.
All this can throw up challenges for the refinancing process, with blockages caused by holdout, non-consenting lenders, Ashurst believes.
“One structure that we expect to see more of is the use of schemes of arrangement to unlock these blockages, not just when a company is facing insolvency. Continuing recent trends, there is likely to be an increased use of bonds to finance oil and gas companies in emerging markets as well as developed ones,” said the company.
As for the mergers & acquisitions (M&A) activity, Ashurst expects that in 2020 it will be variable across the oil and gas value chain.
“From an upstream perspective, large corporates will continue to sell non-core assets, national oil companies will become key players in auction processes on large transactions – particularly in LNG and downstream – and infrastructure funds will continue to look at midstream investments (particularly those that are gas-linked). We may also see infrastructure funds look further downstream to structure retail station portfolio deals with long-term contracting strategies,” said the report.
Oilfield services M&A will likely be busy in 2020, according to Ashurst.
“The blue chips in the sub-sector continue to review their asset portfolios and there are a number of hold periods for private equity that are coming towards their typical end. We will also see a number of structured-finance deals linked to floating production facilities as corporates continue to seek to release capital to pay down debt,” reads the report.
The largest volume (as opposed to deal value) will likely be in the energy transition space. Those under pressure from investors to push forward a low carbon global economy will focus a significant amount of time on investment in this area, according to Ashurst.
“The critical aspect to these investments is choosing those that balance the need for timely investor returns (particularly as compared to historic investments) against the requirement for low carbon credentials. This is not an easy task, but those investment teams that can get it right will be seen as leaders over the next decade.”
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