1 / 23

Energy Industry Check-Up 2009: Trends & Financial Outlook

Stay informed on the latest industry developments including commodity prices, drilling activity, M&A trends, and equity market insights. Explore how changing financial landscapes impact capital expenditure plans and future prospects. ATB Financial's approach in 2009.

Download Presentation

Energy Industry Check-Up 2009: Trends & Financial Outlook

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. AGENDA • ATB Corporate Financial Services • Industry Check-Up: • Commodity Prices • Drilling • M&A Activity • Upstream Equity Market • Leverage Results • Equity Markets • Interest Rates • Capital Expenditure Plans • Technical Reserve Definitions • Changing F.I. Landscape • What Does The Future Hold? • ATB Approach circa 2009

  2. ATB Financial • Crown Corporation (AAA credit rating) • 75 Year-old financial institution offering a broad range of solutions • Mandate to provide financial services for all Albertans • $1.7B in Equity; $25.7 in Total Assets • Operates as four distinct lines of business: • ATB Corporate Financial Services (including Cash Management and Derivatives) • Retail Financial Services • Business & Ag Financial Services • ATB Investor Services (Wealth Management)

  3. ATB Corporate Financial Services – Energy Group • Industry specialization with a focus on Exploration & Production (E&P), Midstream, Drilling & Services, Pipelines and Utilities • Authorized loan book of $4.1 Billion (~ 240 borrowers) • Deposits under management over $1.4 Billion (~ 450 deposit clients) • Staff of 30 professionals, including relationship managers, account managers, derivatives traders and engineering support • Participation in 65 syndications • Hold limits range from $15MM (B equivalent rating – S&P) to over $100MM (A rating)

  4. Commodity Prices – Crude Oil 2008 average: $99.65 2009 YTD: $40.87 2009 WTI forecasts range from $50-$60 As of March 17 Source: Energy Information Administration

  5. Commodity Prices – Natural Gas 2008 average: $8.12 / mcf YTD Spot: $5.62 / mcf 2009 Average AECO forecasts range from $4.00-$6.00 As of March 17 Source: Canadian Association of Petroleum Producers

  6. U.S. Natural Gas Storage Current Stock: 1,681 BCF Last Year: 1,410 BCF 5 Year Average: 1,484 BCF Source: Energy Information Administration

  7. Drilling Activity 2008 actual well completions were down 12% year over year (excluding completion backlog) Average over period: 19,200 wells Source: CAODC

  8. M&A Market There is approximately 50,000 BOE in production currently for sale or under review in the market according to Sayer Energy Advisors Average per BOE: $17.84 Source: ATB Financial

  9. M&A Market Number of transactions announced fell substantially in Q4 2008 compared to the first 3 quarters. As financial and engineering audits are completed the expectation is that M&A activity will increase. Average per BOE: $55,000 Source: ATB Financial

  10. Upstream Equity Market 2008 Flow through total $594MM Source: Sayer Energy Advisors

  11. Leverage Results – E&P Q3 WTI Price As of Q3 2008, the industry as a whole is in good shape financially after enjoying record oil prices. Best positioned: > 20,000 BOED Leverage: 0.8x Mid Cap: 1,000 - 20,000 BOED Leverage: 1.03x Most leveraged: < 1,000 BOE/D Leverage: 2.3x Source: Canoils Database

  12. Equity Market Index is down 38% year over year

  13. Interest rates Prime to BA spread was 2.00% in December 2008 compared to an average of 1.66% over the 3 year period. Current spread is 1.85%.

  14. Capital Expenditure Plans Report by Credit Suisse covering 37 major Upstream North American Companies indicates a US$ 35.6 Billion decrease in 2009 capital investment compared to 2008 In Canada, budget cuts compared to spending last year is $17.0 Billion Announcements related to the delay of certain oil sands projects in Alberta impact nearly 2.0MM barrels of oil production per day, a decrease in over $10 Billion in spending between 2008 and 2009 15,800 Alberta jobs lost in December

  15. Technical Reserve Definitions Proven + Probable + Possible Total Proven Proven + Probable Proved Developed Producing

  16. Changing F.I. Landscape • In 2008 Large Borrowers took steps not to open banking agreements due to pressure on existing terms and conditions • Risk of deferral if markets do not improve before committed period ends • Portfolio weighting issues may impact Junior market if Lenders are unable to free up capital • Terms are being reduced due to cost of capital issues – 3 and 5 year committed terms will require premiums • In recent deals covenants have been added and levels tightened in favor of lenders, focus on debt coverage

  17. Changing F.I. Landscape • Companies requiring financing have seen BA pricing increases of 20 – 125 bps at the top of the grid and 75 – 250 at the bottom • Cross border financings are expensive due to scarcity of capital and fewer participants • Borrowers requiring underwritten deals will pay a large premium for the certainty and risk to the Agent • Debt providers must see returns on own merit. No roll up to total capital markets return • Lenders have exited big names, citing return

  18. Changing F.I. Landscape • Some banks are turning away new business, struggling to maintain current portfolio • Portfolio “clean-up” – dropping weakest borrowers or lowest return accounts in order to conserve capital • Lenders are stepping up only for Borrowers that provide a sufficient amount of ancillary business • Foreign banks with liquidity issues at home are at best staying flat or exiting completely • Other institutions are moving to a full service capital markets platform

  19. What Does The Future Hold? • Borrowing bases will be tested due to lower price deck, lack of reserve growth and reserve write-downs • Borrowers fully drawn may be in a shortfall position and required to term-out debt • Special attention will be given to working capital management, funding check, reserve replacement and flow through obligations • Single bank deal pricing is moving up – expect at least a 25-50 bps increase on Prime loans and higher for riskier borrowers • Increase in new money and facility fees

  20. What Does The Future Hold? • Terms predominantly demand, although committed facilities will be available for larger Juniors (> 5,000 BOE/D) • Stretch financing / bridge loans available on a very selective basis • M&A market is expected to be very robust despite management entrenchment • Private capital and sub debt is still available albeit on tighter terms

  21. ATB Approach circa 2009 They are called CUSTOMERS for a reason Call a spade a spade Is it the assets or the people that’s the “problem”? Use of 3rd parties: run assets // buy assets

  22. Any Questions? Please Contact: BRUCE E. EDGELOW Vice President - Energy Corporate Financial Services ATB Financial 3rd Floor, 239 – 8th Ave SW Calgary, AB T2P 1B9 tel. (403) 974 - 5736 e-mail: BEdgelow@atb.com

More Related