With funding of hydrocarbons exploration and development under the ESG spotlight, the firm's oil and gas experts outline the financing options for E&P companies and how to access them.
The energy transition is having a profound impact on oil and gas financing, as investors and lenders respond to public pressure to wind down fossil fuel extraction.
Continued funding for oil and gas projects is currently consistent with energy transition objectives in that conventional forms of energy are considered necessary to underpin the shift to lower-carbon alternatives and to sustain production of materials derived from hydrocarbons.
It is also imperative that oil and gas companies are funded to invest in technology to minimise emissions from production activities.
Some investors and institutional lenders have opted to exit oil and gas completely, but many remain committed to the sector with the proviso that oil and gas producers must demonstrate good ESG practices and a commitment to operate as sustainably as possible.
While this means E&P companies need to dedicate resources to demonstrating sound environmental credentials and think more broadly about the impact and legacy of their operations, it has also spurred the development of a range of sustainable finance products to complement traditional financing options.
Fieldfisher's updated guide covers:
Equity financing (including public markets, equity lines of credit and standby distribution agreements, convertible loans and SPACs);
Private capital (including private equity, sovereign wealth funds, strategic corporate investors, venture capital, family offices and earn ins);
Debt financing (including project finance, development finance institutions, export credit agencies, reserve-based lending and sustainability-linked loans);
Production based financing (including pre-export financing, prepayment financing, streams and royalties); and
"This is an interesting time for upstream oil and gas financing.
"Concerns about climate change and the future of fossil fuel production have prompted innovations in funding models and are driving welcome developments in the E&P industry's sustainability profile.
"Oil and gas companies have a vital role to play in the energy transition and require funding to enable them to perform that role.
"Our updated guide sheds light on sustainable financing as well as developments in traditional funding, and discusses what lenders and stakeholders expect from E&P companies in order to partner with them on projects."
A copy of the report can be downloaded here.
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