•  Andrew Moorfield James Ogden Alan Ross Terry Rainosek 

     

    Oil & Gas – Sector focus


    Authors: Andrew Moorfield, James Ogden, Alan Ross, Terry Rainosek, Oil and Gas team
    Publication date: 01.08.2010

     
    The oil and gas industry is renowned for its cyclicality, but the volatility over the past two years has been unprecedented. As we’re all aware, the past 24 months have witnessed serious movements in oil prices, a hazardous credit crunch and the tightening of global capital markets. However, we are buoyant about the industry’s prospects, and believe renewed optimism is being fuelled by higher demand, improved investment and, crucially for small and medium-sized independents, increased access to debt funding.

     
    At the start of 2010 some conjectured that the oil price had risen due to speculators either predicting another huge rise in hydrocarbon demand or using oil as a natural hedge against a falling dollar. However, we were confident (and has been proved right) that the current price of oil is driven in the main by the fundamentals of a recovering world economy and from strong growth in developing nations.

     
    Consolidation in the North Sea 

     
    In the North Sea, some of our independent exploration and production (E&P) clients are considering taking advantage of stable oil prices to pursue acquisitions. Consolidation is undoubtedly beneficial for this mature sector and is arguably well overdue, and we have already assisted some clients with financing. We are pleased to be the largest lender of EnQuest — the newly FTSE-listed independent E&P company created from the de-merged assets of Lundin Petroleum and Petrofac — and to be supporting them in their acquisition of Stratic Energy. Consolidation in the North Sea is set to continue for the next 12 months or so, and we expect a number of other transactions (to fund both organic and acquisitional growth) to close by the end of the year.

     

    We are also seeing positive signs on the Norwegian side of the North Sea. We are talking to all top-10 Norwegian independent E&P companies, many of which are interested in our reserve-based lending product. As a result, we expect to close at least four transactions in Norway by the end of the year.

     
    Liquidity top for traders 

     
    While liquidity remains the key financing concern for physical traders, the main trading houses are increasingly opting for clean, unsecured revolving credit facilities (RCF) to support working capital. These have generally been well received by the banking sector, with recent refinancing rounds for several firms consistently being over-subscribed, enabling them to achieve higher levels of financial flexibility.

     
    Strategic asset investment among the traders is set to continue. Access to storage facilities in key locations is vital to physical traders, and is increasingly viewed as a source of competitive advantage. To support trading activities and local supply/demand dynamics, old or inefficient refineries could be converted into pure storage facilities. Diversification across the value chain is also expected to accelerate. Several top trading firms have sought to secure supply at source by investing in (or acquiring outright) E&P firms with producing or near-term development assets. Product diversification has also accelerated in such areas as carbon emissions trading.

     
    Mitigating risk remains key concern
     

     
    Recent events in the Gulf of Mexico mean that safety and environmental risk mitigation will rightly remain the foremost concern across the wider industry. But despite the tragedy off the coast of Louisiana, these are undoubtedly exciting times for this global industry. The stabilisation of oil prices, re-opening of the debt markets and the trend of consolidation in the mature provinces mean considerable opportunities for our clients.

     
    The team 

     
    The Oil and Gas team possesses considerable sector knowledge and has a diverse portfolio of 110 clients. The team enjoys long-standing relationships with the vast majority of the major trading houses.

     
    Our philosophy is to put our balance sheet to work to support our clients over the long-term, offering a combination of products and advice with a strong focus on relationships rather than individual transactions. As well as specific sector knowledge, we can also call on specialist expertise in order to offer a full suite of banking products, including acquisition finance, bi-lateral loans, bonds, private placements, structured products, risk management (including foreign exchange, interest rate, and commodities hedging), asset finance, trade finance, project finance, and access to the equity and debt capital markets.

     
    Oil and Gas senior management 

     
    Andrew Moorfield is MD and Head of Oil and Gas at Lloyds Bank. Prior to joining the group in 2006, he was MD and Co-Head of General Industrials at Bank of America EMEA.

     
    James Ogden, Head of Oil and Gas, London, has worked for Lloyds Banking Group for over 20 years. He joined in 1997 and has managed key relationships across the oil, gas, energy and chemical sectors.

     
    Alan Ross, Head of Oil and Gas, Edinburgh, has over 20 years’ experience with Bank of Scotland, with senior roles in legal services and acquisition finance before joining the Oil and Gas team in 2007.

     
    Terry Rainosek has over 28 years of energy banking and energy industry experience and is Head of Oil and Gas, USA.

     
    Source: This article was first published in Lloyds Banking Group - Perspective Magazine Edition 2.
     

2/23/2018 6:26:23 AM