HomeWebcastOil and Gas Restructuring: Promises and Perils Explored!
Online CLE Oil Gas CLE

Oil and Gas Restructuring: Promises and Perils Explored!

Live Webcast Date: Wednesday, October 24, 2018 from 3:00 pm to 4:00 pm (ET)
Bankruptcy Law (CLE)Recording

Online CLE Oil Gas

Join us for this Knowledge Group Online CLE Oil Gas Webinar. Many exploration and Production (E&P) companies have been severely stressed in the recent commodity price decline that began in mid-2014.   While prices have recovered and the rate of bankruptcy filings has shrunk to a trickle, a great many E&P companies continue to have debt structures that are unsustainable or that constrain their ability to take advantage of growth opportunities.  These companies continue to have a need for changes in their debt structures to remedy the situation.

The energy market is presently in a period that creates both opportunities and challenges for energy lenders and investors, as well as E&P companies. Although it is said that the industry is recovering from the brutal last few years of weak prices, strong pressures toward capital discipline, restraining capital expenditures within cash flow limits, portfolio realignments, and productivity efficiencies have resulted in an increase in the volatility of enterprise values.  New strategies and new capital sources may help to mitigate these pressures on the industry.

Join a panel of thought leaders and professionals brought together by The Knowledge Group as they provide the audience with an in-depth analysis of Oil and Gas Restructuring. They will present a comprehensive overview of the legal and regulatory frameworks of this significant topic while exploring promises and perils of oil and gas restructuring.

Key issues that will be covered in this course are:

  • Restructuring Strategies – Overview
  • Current Trends and Issues
  • Latest Restructuring Strategies
  • Promises and Challenges
  • What Lies Ahead

Agenda

Scott W. Johnson, Managing Director
Chiron Financial LLC
  1. The 2015-2016 oil industry down cycle was the most severe seen since the 1980’s and left many companies overleveraged with debt relative to asset values and cash flows.
  2. The financial strain was significantly increased by a new bank regulation standards with respect to oil and gas loans that were introduced in 2016.
  3. Although the bulk of oil and gas company bankruptcies from this cycle are behind us, the restructuring of oil and gas debt structures has a long way to go.
  4. Since 2016 a large percentage of bank loans to oil and gas companies, especially public companies, have failed bank regulatory requirements, which trigger higher equity reserve requirements and make these loans uneconomic for banks to continue to own.
  5. While the amount of non-complying oil and gas bank debt has come down some, it remains surprisingly high and problematic.
  6. Over time most of the companies in this situation will need to refinance their bank debt with either publicly traded debt, if available, or with non-bank private debt.
  7. Fortunately, the private non-bank debt sector has greatly expanded in recent years, and should be able to fill much of the gap, with capital that is somewhat more expensive but also more flexible and supportive of growth.

Anthony C. Marino, Shareholder
SLATTERY, MARINO & ROBERTS

While structuring of oil and gas ventures and companies often relieves the financial pressures caused by the fall of commodity prices and unforeseen complications of extreme weather, labor and equipment shortages, or management changes dictated by creditors or lenders, one variable or perhaps major “perils” of structuring involves  escalations in financial assurance bonding/p&a commitments that state and/or federal regulators demand.

As a result of the Deepwater Horizon disaster following the blowout of the Macondo well in the U.S. Gulf of Mexico on April 20, 2010, the Taylor Energy Company-owned well that is alleged to have been continuously leaking oil into the U.S. Gulf of Mexico due to underwater mudslide during Hurricane Ivan in 2004, and the ATP Oil & Gas Corporation (“ATP”) bankruptcy filed on August 17, 2012 in the Southern District of Texas,  the bonding and decommissioning obligations of oil and gas companies began to increase significantly.

In particular, the Bureau of Safety and Environmental Enforcement (“BSEE) initiated comprehensive review of all of ATP’s decommissioning liabilities, determining that the assessments were inadequate, and ATP’s financials were woefully insufficient to cover the revised decommissioning assessments.

Moreover. the Bureau of Ocean Energy Management (“BOEM’) supplemental financial assurance policy has become more complex, and more onerous. Although U.S. Department of the Interior (“DOI”) has required supplemental bonds to secure offshore lessees’ compliance with lease requirements since at least 1979, recent iterations of financial assurance guidelines  from 2013 forward have confirmed  DOI’s intent to require supplemental financial assurance for rights-of-way and ongoing reassessment of  lease decommissioning obligations (e.g. the assessments of the decommissioning for certain wells increased from approximately $150,000 or $500,000 to $20,560,000 for completed subsea wells; $2,055,900 for dry tree wells; $13,250,000 to permanently decommission temporarily abandoned subsea wells; and $1,325,000 for temporarily abandoned dry tree wells).

BOEM issued NTL No. 2016-N01 (the “2016 NTL”) on July 14, 2016, effective on September 12, 2016, announcing its revised procedures and criteria in assessing an energy company’s financial ability to successfully complete offshore decommissioning obligations for OCS wells, platforms, pipelines and other facilities. The 2016 NTL is based on five (5) factors when determining the need to post supplemental financial assurance: (i) financial capacity (i.e., audited financials over the last 12 months), (ii) projected strength (the estimated value of existing production and proven reserves for future production), (iii) business stability (five years of continuous operations), (iv) reliability-based ratings, and (v) record of compliance.

These requirements are particularly cumbersome for struggling companies, particularly in organization or merger settings.  The new guidelines do not rely on any single financial metric, but rather on a set of metrics such as liquidity, leverage and performance ratios (e.g. Quick ratio, Earnings Before Interest and Taxes/Interest ratio, Debt/Capital ratio, Return on Assets, etc.). A radical departure that the new guidelines emphasize is that companies can no longer be “waived” or exempt from posting supplemental financial assurance. Larger companies can no longer rely on net worth and “self-insure” against their future decommissioning liabilities by setting aside funds on their balance sheets. Now waivers are no longer granted. Eligible lessees and operators may self-insure but this self-insurance is limited to a maximum of 10% of tangible net worth (measured by total assets less total liabilities and intangible assets).

Given the regulatory hurdles restructured companies must face and the increased dollar amounts required to be posted prior to regulatory approval to conduct business, it is easy to see how a good deal often falls apart because the numbers are huge and the benefits afforded by the good properties are often outweighed by marginal properties that come with the deal.  Moreover,  the lifesaving efforts of restructuring and infusions of money may be easily compromised or totally undone by  enormous regulatory costs of doing business.


Who Should Attend

  • Bankruptcy and Restructuring Practicing Lawyers and Practitioners
  • Oil and Gas Investors
  • Directors and Executives from Energy Sectors
  • Risk Analysts & Controllers
  • Financial Executives
  • Compliance Officers
  • Investment Advisers
  • Investment Bankers
  • Investors
  • Chief Risk Officers
  • Business Consultants
  • Business Analysts
  • Other Related and Interested Professionals

Preview Podcast

Please click the podcast below to hear the speakers discuss the key topics for this webcast.

Online CLE Oil Gas

Scott W. Johnson, Managing Director
Chiron Financial LLC
  1. The 2015-2016 oil industry down cycle was the most severe seen since the 1980’s and left many companies overleveraged with debt relative to asset values and cash flows.
  2. The financial strain was significantly increased by a new bank regulation standards with respect to oil and gas loans that were introduced in 2016.
  3. Although the bulk of oil and gas company bankruptcies from this cycle are behind us, the restructuring of oil and gas debt structures has a long way to go.
  4. Since 2016 a large percentage of bank loans to oil and gas companies, especially public companies, have failed bank regulatory requirements, which trigger higher equity reserve requirements and make these loans uneconomic for banks to continue to own.
  5. While the amount of non-complying oil and gas bank debt has come down some, it remains surprisingly high and problematic.
  6. Over time most of the companies in this situation will need to refinance their bank debt with either publicly traded debt, if available, or with non-bank private debt.
  7. Fortunately, the private non-bank debt sector has greatly expanded in recent years, and should be able to fill much of the gap, with capital that is somewhat more expensive but also more flexible and supportive of growth.

Anthony C. Marino, Shareholder
SLATTERY, MARINO & ROBERTS

While structuring of oil and gas ventures and companies often relieves the financial pressures caused by the fall of commodity prices and unforeseen complications of extreme weather, labor and equipment shortages, or management changes dictated by creditors or lenders, one variable or perhaps major “perils” of structuring involves  escalations in financial assurance bonding/p&a commitments that state and/or federal regulators demand.

As a result of the Deepwater Horizon disaster following the blowout of the Macondo well in the U.S. Gulf of Mexico on April 20, 2010, the Taylor Energy Company-owned well that is alleged to have been continuously leaking oil into the U.S. Gulf of Mexico due to underwater mudslide during Hurricane Ivan in 2004, and the ATP Oil & Gas Corporation (“ATP”) bankruptcy filed on August 17, 2012 in the Southern District of Texas,  the bonding and decommissioning obligations of oil and gas companies began to increase significantly.

In particular, the Bureau of Safety and Environmental Enforcement (“BSEE) initiated comprehensive review of all of ATP’s decommissioning liabilities, determining that the assessments were inadequate, and ATP’s financials were woefully insufficient to cover the revised decommissioning assessments.

Moreover. the Bureau of Ocean Energy Management (“BOEM’) supplemental financial assurance policy has become more complex, and more onerous. Although U.S. Department of the Interior (“DOI”) has required supplemental bonds to secure offshore lessees’ compliance with lease requirements since at least 1979, recent iterations of financial assurance guidelines  from 2013 forward have confirmed  DOI’s intent to require supplemental financial assurance for rights-of-way and ongoing reassessment of  lease decommissioning obligations (e.g. the assessments of the decommissioning for certain wells increased from approximately $150,000 or $500,000 to $20,560,000 for completed subsea wells; $2,055,900 for dry tree wells; $13,250,000 to permanently decommission temporarily abandoned subsea wells; and $1,325,000 for temporarily abandoned dry tree wells).

BOEM issued NTL No. 2016-N01 (the “2016 NTL”) on July 14, 2016, effective on September 12, 2016, announcing its revised procedures and criteria in assessing an energy company’s financial ability to successfully complete offshore decommissioning obligations for OCS wells, platforms, pipelines and other facilities. The 2016 NTL is based on five (5) factors when determining the need to post supplemental financial assurance: (i) financial capacity (i.e., audited financials over the last 12 months), (ii) projected strength (the estimated value of existing production and proven reserves for future production), (iii) business stability (five years of continuous operations), (iv) reliability-based ratings, and (v) record of compliance.

These requirements are particularly cumbersome for struggling companies, particularly in organization or merger settings.  The new guidelines do not rely on any single financial metric, but rather on a set of metrics such as liquidity, leverage and performance ratios (e.g. Quick ratio, Earnings Before Interest and Taxes/Interest ratio, Debt/Capital ratio, Return on Assets, etc.). A radical departure that the new guidelines emphasize is that companies can no longer be “waived” or exempt from posting supplemental financial assurance. Larger companies can no longer rely on net worth and “self-insure” against their future decommissioning liabilities by setting aside funds on their balance sheets. Now waivers are no longer granted. Eligible lessees and operators may self-insure but this self-insurance is limited to a maximum of 10% of tangible net worth (measured by total assets less total liabilities and intangible assets).

Given the regulatory hurdles restructured companies must face and the increased dollar amounts required to be posted prior to regulatory approval to conduct business, it is easy to see how a good deal often falls apart because the numbers are huge and the benefits afforded by the good properties are often outweighed by marginal properties that come with the deal.  Moreover,  the lifesaving efforts of restructuring and infusions of money may be easily compromised or totally undone by  enormous regulatory costs of doing business.


Online CLE Oil Gas

Online CLE Oil Gas

Scott W. JohnsonManaging DirectorChiron Financial LLC

Mr. Johnson is a co-owner of Chiron Financial, which he joined early in 2016. He is responsible for marketing and managing the firm’s corporate finance and restructuring engagements. He has over 30 years of experience in investment banking and energy, with a particular focus on the oil and gas industry.

Prior to joining Chiron, Mr. Johnson was the CFO of Schooner Oil and Gas LLC, which attracted large private equity backing targeting oil and gas properties in the Gulf of Mexico. Mr. Johnson was with Goldman, Sachs & Co. in New York for 13 years in the Corporate Finance Department and the Energy Group and involved in public and private financing and M&A.

In 1991 Mr. Johnson co-founded Weisser, Johnson & Co., an investment banking boutique in Houston focused primarily on providing start-up and growth capital to the oil and gas industry, as well as acquisition and divestiture advisory work. Weisser Johnson completed dozens of private debt and equity financings over a wide range of size during a 22 year span. He also co-founded GasRock Capital LLC, a mezzanine debt and equity investment firm.

Online CLE Oil Gas

Anthony C. MarinoShareholderSLATTERY, MARINO & ROBERTS

Anthony C. Marino is a shareholder at the law firm of Slattery, Marino & Roberts located in New Orleans, Louisiana. Mr. Marino has represented numerous energy producing companies before the State of Louisiana, Office of Mineral Resources, State Mineral and Energy Board, Office of Conservation and the (i) Bureau of Ocean Energy Management; and (ii) Bureau of Safety Environmental Enforcement in the Pacific, Gulf of Mexico, and Alaska OCS Regions, Department of the Interior, Interior Board of Land Appeals, and other regulatory agencies concerning a variety of matters such as plugging and abandonment liability, bonding, and incidents of non-compliance. Mr. Marino received his J.D. degree from Loyola University School of Law and attended the University of New Orleans, where he received his B.A. degree. Mr. Marino is an Adjunct Professor at Loyola University School of Law where he teaches Mineral Law. Mr. Marino is the recipient of the AAPL APEX Educational Award in both 2000 and 2005, and the Corporate Leadership Award from the then Minerals Management Service, Pacific OCS Region in 2004.


Click Here to Read Additional Material

Online CLE Oil Gas

Course Level:
   Intermediate

Advance Preparation:
   Print and review course materials

Method Of Presentation:
   On-demand Webcast; Group-Internet Based

Prerequisite:
   Basic Knowledge on Oil and Gas Restructuring

Course Code:
   147698

NY Category of CLE Credit:
   Areas of Professional Practice

NASBA Field of Study:
   Specialized Knowledge - Technical

Total Credit:
    1 NASBA-CPE

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About the Knowledge Group

The Knowledge Group

The Knowledge Group has been a leading global provider of Continuing Education (CLE, CPE) for over 13 Years. We produce over 450 LIVE webcasts annually and have a catalog of over 4,000 on-demand courses.

About the Knowledge Group

The Knowledge Group

The Knowledge Group has been a leading global provider of Continuing Education (CLE, CPE) for over 13 Years. We produce over 450 LIVE webcasts annually and have a catalog of over 4,000 on-demand courses.

Chiron Financial is a Houston based investment bank with representatives in Dallas and Paris.  Its business includes private debt and private equity capital raises as well as M&A and financial advisory assignments serving middle market companies in the energy sector and across a broad range of industries.  Unlike many firms addressing these markets, Chiron is active in both growth capital raises and financial restructuring.

Website: https://www.chironfinance.com

Slattery, Marino & Roberts (“SMR”) located In New Orleans, Louisiana, provides legal expertise in litigation and transactional matters with a focus on matters involving the oil and gas industry.  SMR counsels companies with interests located on the Outer Continental Shelf as well as in deepwater and represents clients in dealings with government agencies, including the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) in all OCS Regions.  SMR also advises clients on matters involving offshore and onshore Louisiana properties.  The firm assists clients with federal and state regulatory and taxation issues as well as other business and commercial law matters, corporate law, contract negotiations, and business transactions.

Website: https://www.smr-lawfirm.com

Mr. Johnson is a co-owner of Chiron Financial, which he joined early in 2016. He is responsible for marketing and managing the firm’s corporate finance and restructuring engagements. He has over 30 years of experience in investment banking and energy, with a particular focus on the oil and gas industry.

Prior to joining Chiron, Mr. Johnson was the CFO of Schooner Oil and Gas LLC, which attracted large private equity backing targeting oil and gas properties in the Gulf of Mexico. Mr. Johnson was with Goldman, Sachs & Co. in New York for 13 years in the Corporate Finance Department and the Energy Group and involved in public and private financing and M&A.

In 1991 Mr. Johnson co-founded Weisser, Johnson & Co., an investment banking boutique in Houston focused primarily on providing start-up and growth capital to the oil and gas industry, as well as acquisition and divestiture advisory work. Weisser Johnson completed dozens of private debt and equity financings over a wide range of size during a 22 year span. He also co-founded GasRock Capital LLC, a mezzanine debt and equity investment firm.

Anthony C. Marino is a shareholder at the law firm of Slattery, Marino & Roberts located in New Orleans, Louisiana. Mr. Marino has represented numerous energy producing companies before the State of Louisiana, Office of Mineral Resources, State Mineral and Energy Board, Office of Conservation and the (i) Bureau of Ocean Energy Management; and (ii) Bureau of Safety Environmental Enforcement in the Pacific, Gulf of Mexico, and Alaska OCS Regions, Department of the Interior, Interior Board of Land Appeals, and other regulatory agencies concerning a variety of matters such as plugging and abandonment liability, bonding, and incidents of non-compliance. Mr. Marino received his J.D. degree from Loyola University School of Law and attended the University of New Orleans, where he received his B.A. degree. Mr. Marino is an Adjunct Professor at Loyola University School of Law where he teaches Mineral Law. Mr. Marino is the recipient of the AAPL APEX Educational Award in both 2000 and 2005, and the Corporate Leadership Award from the then Minerals Management Service, Pacific OCS Region in 2004.

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