financing in a high cost oil & gas world

Financing in a High Cost Oil & Gas World

CHAIR Jan Prins - Member, Advisory Board Energy Intelligence; Former

Managing Director ABN AMRO

Ian Catterall - Head Natural Resources for EMEA

Bank of Tokyo-Mitsubishi UFJ

Todd Levy - President Chevron Europe, Eurasia, Middle EastE&P Company

Mike Powell - Managing Director and Co-Head Oil & Gas, EMEA Barclays

Source: IEA

World Energy

Investment

Outlook 2014

World USA

Oil & Gas Oil & Gas

Upstream 740 143

Transport 177 26

Refining 77 11

994 180

Increase 46% 76%

Debt Finance 275 47

Average Annual Investment 2014 – 2020

(US $ Bln.)

$ 0

$ 100

$ 200

$ 300

$ 400

$ 500

$ 600

$ 700

$ 800

$ 900

$ 1,000

2000 - 2013 2014 - 2020

Refining

Transport

Upstream

Global Average Annual Investment

(US $ Bln.)

Global Oil & Gas Investments will increase by 50% during the coming years;

In the USA the increase will be more than 75%;

Debt financing needed may increase even more than that given cash flow shortfalls in the oil & gas sector.

Major energy companies’ cash from operations flattens;

This creates a funding gap between and cash sources and uses;

To be closed by asset sales and debt finance.

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014

Proceedsfrom AssetSales

NetIncreases inDebt

Cash fromOperations

1st Quarter sources of cash for major energy companies.

Major energy companies’ cash from operations and uses of cashBillion, 2014 US dollars, annualized values from Quarterly reports

Source: U.S. Energy Information Agency, July 2014 Jeff Barron. Study based on results 127 global oil and gas companies.

400

450

500

550

600

650

700

2010 2011 2012 2013 2014

Cash from Operations

Uses of Cash:Capex,

Dividends and Share Repurchases

Gap to be closed by Asset Sales and Debt

0

100

200

300

400

500

600

04/01/2008 04/07/2008 04/01/2009 04/07/2009 04/01/2010 04/07/2010 04/01/2011 04/07/2011 04/01/2012 04/07/2012 04/01/2013 04/07/2013 04/01/2014 04/07/2014

in bps

French Banks Southern European Banks German Banks

UK Banks US Major Banks Japanese Banks

0

100

200

300

400

500

600

04/01/2008 04/07/2008 04/01/2009 04/07/2009 04/01/2010 04/07/2010 04/01/2011 04/07/2011 04/01/2012 04/07/2012 04/01/2013 04/07/2013 04/01/2014 04/07/2014

in bps

French Banks Southern European Banks German Banks

UK Banks US Major Banks Japanese Banks

Banks Liquidity: CDS levels

$

$ 100

$ 200

$ 300

$ 400

$ 500

$ 600

$ 700

$ 800

$ 900

2010 2011 2012 2013

Oil & Gas Fund Raising (US $ Bln) Equity

BankLoans

ProjectFinance

Bonds

Source:

ThomsonONE/EY

Exploration &

Appraisal

Development &

Production

Portfolio

Expansion

IPO Reserve Based

Lending

Cash from

Operation

Private Equity Public Bonds Bank Loans

Further Issues Project Finance Infrastructure

Funds

Private

Placement

Asset Sales

Principle Sources of Oil & Gas Funding