Transcript
8/17/2019 FPSO ASSET INTEGRITY PART 2
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15 - 16 October 2015
Crowne Plaza London - Heathrow, London, United Kingdom
th th
FPSO Asset Integrity Managementand Life Extension Forum
Improving cost efficiencies and minimizing shutdown time whist increasing
vessel productivity, value and safety
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FINANCING FPSO LIFEEXTENSION PROJECTS:
CRITICAL SUCCESS FACTORS FPSO Asset Integrity Management and Life Extension Forum
15-16 October 2015, London
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DISCLAIMER
This document has been prepared by SG Corporate & Investment Banking (“SG CIB”), a division of Societe Generale.
In preparing this document, SG CIB has used information available from public sources. No express or implied representation or
warranty as to the accuracy or completeness of such information is made by SG CIB, nor any other party. The accuracy,completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn
from sources believed to be reliable. SG shall not assume any liability in this respect.
Any views, opinions or conclusions contained in this document are indicative only, are not based on independent research and do
not represent an offer or commitment, express or implied, on the part of SG to underwrite or purchase any securities or any
financial instrument(s) referred to herein or to commit any capital, nor does it commit SG to enter into an underwriting agreement
or similar commitment to finance, such an offer being subject to contract, the completion of satisfactory due diligence and allnecessary credit, management and other approvals being obtained.
Any information in this document is purely indicative and has no contractual value. The contents of this document are subject to
amendment or change at any time and SG CIB will not notify any party of any such amendment or change. No responsibility orliability (express or implied) is accepted for any errors, omissions or misstatements by SG CIB except in the case of fraud or any
other liability which cannot lawfully be excluded. This document is of a commercial and not of a regulatory nature.
The commercial merits or suitability or expected profitability or benefit of any transaction described in this document to any party’s
particular situation should be independently determined by the said party. Any such determination should involve an assessment
of the legal, tax, accounting, regulatory, financial, credit and other related aspects of any such transaction. SG CIB shall not be
liable for any failure of any party to obtain such information and advice.
This document is to be treated in the strictest confidence and is not to be disclosed directly or indirectly to any third party. It is not
to be reproduced in whole or in part, nor used for any purpose except as expressly authorised by SG CIB.
This document is issued in the UK by the London Branch of SG. SG is a French credit institution (bank) authorised by the Autorité
de Contrôle Prudentiel (the French Prudential Control Authority). SG is subject to limited regulation by the Financial Services
Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request.
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CONTENTS
SOCIETE GENERALE IN BRIEF
FPSO LIFE EXTENSION: CONCEPTS
DEFINITION 6
REQUIREMENTS 7
MARKET FOR FPSO LIFE EXTENSIONS
HISTORY 8
OPPORTUNITIES 9
FINANCING
FINANCING OF FPSO LIFE EXTENSIONS WORK 10
FINANCING OF CONTRACTOR-OWNED FPSOS: REQUIREMENTS 11
FINANCING OF CONTRACTOR-OWNED FPSOS: RISK PARAMETERS 12
FPSO DEBT REFINANCING: CASE STUDY (1) 13
FPSO DEBT REFINANCING: CASE STUDY (2) 14
CONCLUSION
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SOCIETE GENERALE IN BRIEFLeading global bank
30 millionclients worldwide
€2,7 billionGroup net income
148,000employees
€23.6 billionnet banking income
Financial rating A Standard & Poor’s
A FitchAA (low) DBRS
A2 Moody’s
French Retail Banking
International Retail Banking & Financial Services
Global Banking and Investor Solutions
A STRONG UNIVERSAL BANK,SERVING OUR CUSTOMER AND THE ECONOMY,
BUILT ON 3 COMPLEMENTARY PILLARS
76 countries Over 60% of staff arebased outside ofmainland France
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Our Business
SG’s Shipping/Offshore Group selectively focuses on three asset segments: Offshore, LNG shipping and industrial shipping
Financing Solutions
Corporate lending: Full recourse financing to investment grade and sub-investment grade counterparties
Project Finance & Advisory: Limited recourse financing underpinned by long term charters
Capital Markets: Project bonds, high-yield bonds and equity placement our integrated approach
Export Finance: Export Credit Agencies backed loans
Leasing: Both on- and off-balance-sheet financings through domestic and cross border leases
SG SHIPPING & OFFSHORE FINANCE
LNG shipping
FPSOs
Offshore drilling
Tankers
Dry bulk
Car Carriers
Containers
Others
Franchise with professionals in Paris, London, Hong Kong and Sao Paulo
Joint Lead Arranger andSwap Bank
2014 UNITED STATES
Delta House FloatingProduction SystemSenior Secured Credit Facility
USD 400,00,000
Initial Bookrunning MandatedLead Arranger and SwapBank
2014 BRAZIL
USD 1,450,000,000
Financing of the FPSO Cidade deMarica
Mandated Lead Arranger
2014 THAILAND & MALAYSIA
USD 225,000,000
Refinancing of West DesaruMOPU (FPF5) and JasmineVenture FPSO (FPF3)
Financing of the FPSO Cidadede Saquarema
Initial Bookrunning MandatedLead Arranger, Co-Market HedgeCoordinator and Hedge Provider
2015 BRAZIL
USD 1,550,000,000USD 450,000,000
Co-arranger
2015 VARIOUS LOCATIONS
Refinancingof 6 jack-up rigs
USD 1,685,000,000
Lead Arranger and HedgingBank
2015 BRAZIL
Financing of the FPSOCidade de Campos dosGoytacazes MV29
Selected Recent Offshore Transactions
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FPSO LIFE EXTENSION: DEFINITION AND CONCEPTSExisting location versus redeployment
What is a FPSO life extension?
● Extension of the vessel’s initial design and economic life by way of repairs, modification or overhaul to
address the following requirements:
On the existing location: to continue production due to a variety of reasons: new well stream, new
production phases, new tie-ins, tail-end production or increased oil recovery
=> Many fields have historically experienced extended life, hence a sustained demand for FPSO life
extensions
Redeployment: to use a FPSO coming off contract in another location
=> We have also seen several redeployments in the past (20+ vessels)
What does life extension apply to?
● Any FPSO type: conversion or newbuild
● Any FPSO ownership structure: owned by contractors or field operators
● Other production related assets like FSOs
Where is life extension work done?
● At sea (in situ), for most of life extensions on existing locations
● In a yard (dry-dock), for most of the redeployments
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FPSO LIFE EXTENSION: REQUIREMENTSCost effectiveness is key, especially in the current low oil price environment
Cost and time effective
● Pressure on production costs from field operators to maintain their profitability in the current low oil price
environment
● Life extensions on existing locations may be particularly cost and time effective (continuous production)
Safe and technically viable
● Asset integrity studies on key vessel components: hull, topsides, mooring, turret, offloading buoys, turbines
● Review of vessel historical performance (based on data collected over years on vessel’s condition,
maintenance requirements, incidents, etc)
● Classification of the vessel with relevant class societies
Regulation abiding
● Compliance with applicable regulation
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MARKET FOR FPSO LIFE EXTENSIONS: HISTORYOut of the current 165 FPSO fleet, at least 30 units have experienced life extensions or redeployments
FPSO life extension on the existing location
● At least 10 existing FPSOs are or will be subject to life extensions on their
initial location, beyond their design life
● Example: Espoir Ivoirien FPSO, owned by BW Offshore and located
offshore Ivory Coast: 10-year initial charter period (2002 – 2012), 4-year
firm extension (2013 – 2017), 19-year options (2017 – 2036).
=> Potential total FPSO life of 33-years versus shorter initial design life
FPSO life extension on other locations (redeployment)
● At least 20 existing FPSOs are or will be redeployed, beyond their initial
design life
● Example: Petrojarl I FPSO, owned by Teekay Offshore Partners: after 28
years of operations in the North Sea on multiple fields, the vessel is
expected to be redeployed offshore Brazil in 2016 under a 5-year charter
contract.
=> Potential total FPSO life of 33-years versus shorter initial design life
Espoir Ivoirien FPSO
Source: BW Offshore
Petrojarl I FPSO
Source: Teekay Offshore Partners
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MARKET FOR FPSO LIFE EXTENSIONS: OPPORTUNITIESLow oil price environment may actually lead to opportunities
Increasing opportunities due to the ageing existing fleet
● Out of the 165 existing FPSOs, most have a design life of under 20-year
● Although design life has been increasing recently for bigger vessels (25 years), some existing units are
approaching the end of their design life, hence candidates for life-extension are expected to grow
Low oil price environment may lead field operators to focus on producing
projects (brownfield) as opposed to exploration projects (greenfield)
● Many field operators have reported capex cuts but opex budgets seem to be less affected
● Production break-even costs for mature fields are much lower than new projects and may still be lower than
the current oil price (Brent of USD 52/ barrel as per 7 October 2015)
● As a result demand for FPSO life extension might be favoured by the current environment
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FINANCING OF FPSO LIFE EXTENSION WORKOperator-owned versus contractor owned vessels
Cost ranges
● Life extension on existing locations: USD [10-100]m
● Redeployments: USD [50-500]m
Costs recovered via milestones versus charter rate
● For operators-owned vessels: via milestone payments. If these payments are financed by debt, such debt is
typically raised by field operators at corporate level
● For contractor-owned vessels: either (i) via charter rate to contractor during extension or (ii) via milestone
payments to contractor
Asset releveraging with debt from FPSO banks is possible
● Contractor may (re)raise debt at the project level (i.e. on a “limited recourse basis”) to be repaid by future
charter rate while ensuring a satisfactory equity return
● Banks can use a typical FPSO financing structure for releveraging (especially if the asset was project financed
in its initial economic life)
● Historically the FPSO releveraging market is smaller than the “new” conversion financing market
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FINANCING OF CONTRACTOR-OWNED FPSOS: REQUIREMENTSUsual limited recourse financing structure
Typical FPSO financing security package
● Mortgage
● Assignment of charter contract (if possible with acknowledgement from charterer or quiet enjoyment letter)
● Assignment of insurances
● Account pledge (e.g. revenue account, debt service reserve account)
● Special vehicle borrower’s share pledge
Typical FPSO financing requirements
● Covenants
Minimum debt service cover ratio (revenues / debt service)
Debt amount and tenor based on charter cash flows
Dividend subject to certain conditions
Ownership covenant
Negative pledge, no disposal / sale of the FPSO, etc
● Reporting
FPSO performance reports (with uptime)
Compliance certificate (confirming that covenants are in order)
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FINANCING OF CONTRACTOR-OWNED FPSOS: RISK PARAMETERS
Risks Typical events Counterparty /
analysis
Mitigants
Life extension
worktechnical risk
• Delays
• Costs overruns
• Contractor
• Suppliers /Subcontractors
• Shipyard
• Experienced contractor / suppliers / subcontractorsshipyard, with proven track record
• Refund guarantee to underpin shipyard obligations
• Warranties / Liquidated damages
Charter
payment risk
• Charter rate is notpaid
• field operator (ascharterer)
• JV (if projectcharterer)
• Quality of charterer
• Terms of the charter contract
• Field production profile (if applicable)
• Offshore account structure• Priority of charter payments in the project cash waterfall
Operating risk • Vessel does notperform
• Contractor (asvessel operator)
• Reputable operator with requisite experience
• Content of the O&M contract
• Proven ship technology
Force Majeure
risk
• Force Majeureevent
• field operator
• Insurer
• Insurance
• Terms of the charter contract
Political /
Country risk
• Confiscation,expropriation,
nationalisation, or
deprivation of the
vessel
• field operator
• Insurer
• Offshore borrower / account structure
• Offshore flagging – lender friendly jurisdiction
• Payments security mechanism
• Insurance
FPSO banks consider certain risks
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FPSO DEBT REFINANCING: CASE STUDY (1)Societe Generale participated in the refinancing of two vessels in 2014
Project characteristics
● West Desaru MOPU (FPF5) offshore Malaysia and Jasmine Venture
FPSO (FPF3) offshore Thailand
● Owned by a joint venture between First Reserve and Petrofac
● USD 225m debt financing, tenor of 6 years, closed in August 2014
● Financing secured by the two vessels and to be repaid by the cashflows
generated in the respective charter contracts
Combination of redeployment and life extension● West Desaru MOPU, built in 1976 and redeployed from Australia to
Malaysia in 2013
● Jasmine Venture FPSO, converted in 1999 and producing on the Jasmine
field since 2005
● It has been reported that Mubadala Petroleum (operator of Jasmine field)
is looking for another FPSO for this field for an additional period of 5 to 10
years
Jasmine Venture FPSO (FPF3, ex Buffalo Venture)
Source: Petrofac
West Desaru MOPU (FPF5, ex Ocean Legend)
Source: Petrofac
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FPSO DEBT REFINANCING: CASE STUDY (2)Societe Generale co-arranged the financing of a FPSO redeployment in 2013
Project characteristics
● The FPSO Xikomba worked during 8 years offshore Angola and was
disconnected in 2011
● After refurbishment the vessel was renamed N’Goma and was redeployed
in late 2014 to another field offshore Angola under a new 12-year charter
contract
● Owned by a joint venture between SBM Offshore, Sonangol and Angolan
Offshore Services
● USD 600m debt financing, closed in August 2013
● Financing secured by the vessel and to be repaid by the cashflowgenerated by the new charter contract N’Goma FPSO (ex Xicomba)
Source: SBM Offshore
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CONCLUSIONDebt finance is available for the right FPSO life extension or redeployment projects
Existing market with track record
Historically nearly 20% of the global FPSO fleet has been subject to life extension or redeployment
Market expected to grow
In the current low oil price environment demand for these two cost-effective and safe solutions is expected to continue
to grow, as field operators need to maintain existing production while reducing exploration costs
Project finance has been testedFor contractor-owned vessels, life extension and redeployment costs can be and have been debt financed on a limited
recourse basis (project-financed)
Project finance is available
Debt finance for FPSO life extension or redeployments is available for projects with satisfactory parameters: contractor
track record, vessel history, charter counterparty and location
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Thank you
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