• Login
  • Register
Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
Nairametrics
No Result
View All Result
Home Companies Corporate Press Releases

Raising finance to acquire a marginal field? Key issues to consider – FBNQuest

NM Press by NM Press
July 2, 2020
in Corporate Press Releases
Raising finance to acquire a marginal field? Key issues to consider – FBNQuest
Share on FacebookShare on TwitterShare on Linkedin

On the 1st of June 2020, the Federal Government of Nigeria (“FGN”) via the Department of Petroleum Resources (“DPR”) formally announced the commencement of the long-awaited marginal field bid round. According to the guidelines published by the DPR, a marginal field is defined as a field that has been discovered and left unattended for a period of not less than 10 years from the date of first discovery or such field as the President may from time to time, identify as a marginal field. The first marginal field bid process occurred in 2001 and resulted in the award of 24 marginal fields to 32 companies. Another bid round was scheduled to take place in 2013 but was subsequently suspended. In this latest bid round, a total of 57 fields located on a combination of land, swamp and shallow terrains are on offer and there has been significant interest from investors in the process thus far.

Innovative financing will be critical particularly in the context of the current low oil price environment and economic impacts of the COVID-19 pandemic.  It is therefore important that preferred bidders understand the need to structure optimal and bankable financings for the development of the asset post-acquisition.

 

RelatedStories

FBNH

First Bank of Nigeria halts misconceptions, Clarifies sale of FBNQuest merchant bank 

September 11, 2024
Meet 10 influential women leading Capital market firms in Nigeria

Meet 10 influential women leading Capital market firms in Nigeria

October 22, 2023

Robust Financing Structures

This encompasses the source of financing, framework and the various contracts that underpin how the financing will be availed. Reserve based lending structures, contractor financing and forward sale/prepayment structures are some forms that are likely to be utilized by prospective financiers.  A critical element in all possible financing structures and indeed most project financing type transactions is the offtake agreement. In the oil and gas industry, an off-take agreement establishes the contractual framework for the purchase and sale of oil and or gas between the seller and the off-taker. The terms of the agreements are typically negotiated before field development and will become effective upon completion of the project and production from the field commences.  This project document is quite key in ensuring the financing is secured for the project as it provides evidence that validates the financial model and cash flow projections that will underpin the asset cash flows. Offtake agreements have also become increasingly important for financing structures that involve some form of forward sale or prepayment. Lenders will seek to review the terms of the agreements as well as the creditworthiness of potential off-taker(s) and will often require that these parties either be of a specified credit rating and if not, be able to provide additional credit support (letter of credit/guarantees) to assure performance of their obligations under the agreement.  Given that this document (amongst others) contributes towards the bankability of the transaction, it is generally and in most cases made a condition precedent to the financing and will be expected to be in place prior to the disbursement of funds.  Other aspects of the financing structure which needs to be considered by prospective bidders include validation of reserves and escrow accounts, hedging requirements, defined cash waterfalls, credit enhancements from the sponsors and the inclusion of parties such as security trustee, facility agent and a technical consultant to validate the technical and operating assumptions in the financial models.

 

Independent Due Diligence

In the oil and gas industry, due diligence is critical in view of the significant quantum of investment, as well as the technical, commercial and environmental complexities which can expose parties to significant risks.  Due diligence is sure to be undertaken by prospective financiers however, the level of due diligence will largely be dependent on the type of financing that the bidder is seeking to raise, with project finance structures requiring extensive levels of due diligence. Bidders should note that although internal due diligence may have been undertaken on the intended assets, financiers will still seek to independently validate the due diligence results provided by the client.  Typically, financiers will require the services of specialists in various fields such as Technical (Surface and Subsurface), Legal, Environmental, Insurance and a Financial Model, Accounting and Tax Auditor. Due diligence in the aforementioned areas are key for project finance transactions and even more so in an upstream oil and gas deal where cash flows and repayments are based on oil and or gas reserves.

 

Risk mitigation

Based on the independent due diligence results, prospective financiers will seek to ensure that transaction risks have been allocated to the parties’ best placed to handle such risks.  As a bidder, it is advisable to have thought through all possible risks of the proposed transaction and work towards ensuring that risks such as geological, operational, environmental, price, regulatory risks and others are suitably mitigated. Extensive due diligence is therefore required particularly in Technical (Reserves and Associated Infrastructure) and Environmental areas. In addition, other critical requirements set out in the existing guidelines such as, evidence of technical capabilities of the management and operational teams, proposed field development plans, evacuation infrastructure etc are essential aspects of the deal which need to be taken into consideration and will be critically reviewed by prospective lenders. In spite of the current macro-economic environment, significant interest from numerous prospective investors shows that industry participants believe the process is long overdue irrespective of timing. The energy sector, and in particular, upstream oil and gas, remains a critical sector for Nigeria. It is therefore in the interest of all industry participants that the marginal field bid round process is transparent and that bids are carefully evaluated against stringent criteria to ensure that these marginal fields are ultimately awarded to firms and or consortiums with the technical capacity and financial backing required to develop and operate these assets. Finance will be a critical aspect of this process and to ensure that industry players are able to successfully attract the funding required, the above items should be carefully considered as the bid round progresses.

 

Ifeoma Finnih

Head Oil, Gas & Infrastructure, Debt Solutions, FBNQuest.


Follow us for Breaking News and Market Intelligence.
Tags: department of petroleum resourcesFBNQuestIfeoma Finnih
NM Press

NM Press

Related Posts

FBNH
Companies

First Bank of Nigeria halts misconceptions, Clarifies sale of FBNQuest merchant bank 

September 11, 2024
Meet 10 influential women leading Capital market firms in Nigeria
Exclusives

Meet 10 influential women leading Capital market firms in Nigeria

October 22, 2023
DLM Capital Group raises N5.304 billion in commercial paper issuance
Business News

DLM Capital Group raises N5.304 billion through commercial paper issuance

February 28, 2023
FBNQuest Merchant Bank
Company News

FBNQuest urges mid-cap firms to explore financing options available in local financial markets

November 4, 2022
FBNQuest
Corporate Press Releases

FBNQuest affirms its commitment to stakeholders with ‘Powered by People’ campaign

June 20, 2022
NEITI says Nigeria lost $2.77 billion to oil theft in 2019
Business

NNPC, FIRS, 2 others generated N28 trillion revenue for Nigeria in 3 years – NEITI

April 29, 2022
Next Post
FG New Minimum Wage, Egypt megaproject, German Chancellor Angela Merkel, President Buhari and Angela Merkel meeting, President Buhari to sign deal with Siemens, Siemens

Buhari suspends NSITF MD and other top management officials, appoints acting MD  

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Emple
nlng
first bank








DUNS

Recent News

  • ‘My Mother Is A Witch’ crosses N100 million at Nigerian box office 
  • Payaza’s triple credit rating: A milestone for Nigerian fintech leadership 
  • CWG’s Texcellence Prelude champions bold leadership for Africa’s Tech Future 

Follow us on social media:

Recent News

‘My Mother Is A Witch’ crosses N100 million at Nigerian box office 

‘My Mother Is A Witch’ crosses N100 million at Nigerian box office 

July 15, 2025
Payaza’s triple credit rating: A milestone for Nigerian fintech leadership 

Payaza’s triple credit rating: A milestone for Nigerian fintech leadership 

July 15, 2025
  • iOS App
  • Android App
  • Contact Us
  • Home
  • Markets
  • Sectors
  • Economy
  • Business News
  • Financial Literacy
  • Disclaimer
  • Ads Disclaimer
  • Copyright Infringement

© 2025 Nairametrics

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Social Media Auto Publish Powered By : XYZScripts.com
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Login
  • Sign Up

© 2025 Nairametrics