This group brings together those who are interested in topics around oil and gas exploration, drilling, refining, and processing.

Tariq Siddiqui's picture
COO, Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind -  Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles...

  • Member since 2021
  • 136 items added with 95,144 views
  • Nov 12, 2021

Recent deals have brought more attention to the nascent market of oil and gas securitizations. While oil and gas price increases have opened up traditional sources of capital, the securitization structure is a new tool to add to the traditional sources of financing

  • A securitization is a highly structured financing designed to issue notes with amortization that matches a predictable cash stream.

  • The assets that give rise to the cash stream are transferred into a newly formed special purpose vehicle (SPV) to isolate those assets from operating and corporate risk of the sponsor group. 

  • In the context of an oil and gas securitization, the assets are the proved, developed producing (PDP) reserves of hydrocarbons to be marketed and sold in the future.

Who should consider this structure?
  • For complete securitization, it may be attractive to a sponsor group that would like to have a capital-raising event to either provide proceeds to equity or to raise funds for the development of another project or other undeveloped assets.
  • For a partial securitization, it can be attractive to any sponsor group that would like to diversify their sources of capital and their capital structure. 
What type of assets are the best candidates for this approach?
  • In general, however, the most important characteristic of suitable PDP assets is a predictable cash flow profile, taken as a whole.
  • To achieve an investment grade rating for the notes , there must be predictable production, pricing and, to the extent possible, predictable costs and expenses that could materially affect the cash flow coming into the account of the SPV.  

Why this structure is gaining traction

  • For investors, the cash flow profile of oil and gas PDP is relatively predictable, so production risk is a tolerable variable for investors and ratings agencies.

  • With hedging, the predictability and investment grade rating make the investment in these assets a safe way to get slightly above market returns on their investment in securitization notes from other more traditional asset classes.


As the oil and gas securitization structure and market continue to develop, securitizations will likely become more attractive to more investors and sponsors. 


No discussions yet. Start a discussion below.

Tariq Siddiqui's picture
Thank Tariq for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »