North American Oil & Gas Deal of the Year 2001
In an industry ? in North America at least ? characterised predominantly by mergers and acquisitions activity, some players are becoming creative in their wish to avoid being drawn into the embrace of a major's balance sheet. So it is with this innovative monetisation of gas production interests arranged by Credit Suisse First Boston. The deal is designed to free up cash for expansion of oil and gas production. The deal closed in January 2001 and will be watched keenly by other commodities producers, although given present market conditions structural details will remain the province of corporates and their advisors.
The deal, for roughly $260 million, monetizes future gas production interests in a US gas property. While Equitable Resources remains the operator of the properties and benefits from such production, the deal has been structured as a sale of gas production from an accounting standpoint. Lenders rely solely on the predictability of gas reserves, so the deal is without recourse to the parent. Unlike share trust transactions often used elsewhere in the industry, this deal is truly non-recourse.
CSFB took on two key roles on the financing. The first of these was to provide a natural gas hedge on the output of the gas monetisation, and therefore smooth out the repayment profile of the debt and equity. Both debt and equity could then be placed by CSFB, in its other capacity as manager of the institutional project finance program, to investors.
The deal is a useful reminder of the possibilities - when a robust, predictable and long-term revenue stream exists ? of the CSFB institutional fund. While this has been less of a presence in the big-ticket construction market, it has provided a quick, convenient and secure distribution channel for lease and other tax and balance-sheet friendly debt. Other sponsors, anxious not to lose their independence, but also to gain on any upside from their investments, could follow suit.
The deal, for roughly $260 million, monetizes future gas production interests in a US gas property. While Equitable Resources remains the operator of the properties and benefits from such production, the deal has been structured as a sale of gas production from an accounting standpoint. Lenders rely solely on the predictability of gas reserves, so the deal is without recourse to the parent. Unlike share trust transactions often used elsewhere in the industry, this deal is truly non-recourse.
CSFB took on two key roles on the financing. The first of these was to provide a natural gas hedge on the output of the gas monetisation, and therefore smooth out the repayment profile of the debt and equity. Both debt and equity could then be placed by CSFB, in its other capacity as manager of the institutional project finance program, to investors.
The deal is a useful reminder of the possibilities - when a robust, predictable and long-term revenue stream exists ? of the CSFB institutional fund. While this has been less of a presence in the big-ticket construction market, it has provided a quick, convenient and secure distribution channel for lease and other tax and balance-sheet friendly debt. Other sponsors, anxious not to lose their independence, but also to gain on any upside from their investments, could follow suit.
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