Upstream Downstream Expertise
Core Capital has extensive experience in the energy sector and have funded numerous transactions in a wide range of structures. Below are the upstream and midstream areas we focus on.
We specialize in the following areas. Click on the (+) to read more.
During recent years, volumetric production payments (VPP) have regained popularity as financing vehicles for oil and natural gas exploration and production (E&P) companies. From the perspective of producers raising funds by selling VPPs (often referred to as the Seller), VPPs can raise funds on attractive terms. Investors advancing funds to the producer under the VPP (usually financial institutions and other E&P companies referred to as the Buyer) can profit from a relatively safe investment if appropriately structured. In fact, as these transactions greatly dampen commodity price risk (which is by far the greatest contributor to swings in oil and gas corporate credit quality), eliminate management’s discretion to change the capital structure and asset base through transactions (the next largest risk), diminish the probability of fraud (as a result of independent evaluations of the property base), and have the most senior claim on the assets as a result of their senior secured status in the bankruptcy process, VPP-backed obligations can be structured to be substantially less risky than either secured or unsecured corporate oil and gas corporate debt.
Every oil and gas royalty, lease or overriding royalty interest has its own unique characteristics which require a thorough review and study of a variety of different elements that may affect the value. When Core Capital performs its due diligence analysis prior to funding decision, we are evaluating, among other things, the following:
- Individual royalty interest percentage.
- Concentration risk.
- Reservoir characteristics.
- Historical production performance.
- Oil and gas commodity pricing (NYMEX).
- Future drilling potential.
- Age of production equipment.
Some say oil pipelines originated when the Oil Transport Association first constructed a 2-inch wrought iron pipeline over a 6-mile track from an oil field in Pennsylvania to a railroad station in Oil Creek, in the 1860s. From the 1860’s to today pipelines are essential assets, that if managed properly, can be a long term source of cash flow, and as such, we can evaluate and provide financing for this asset class. Core Capital has done significant work not only evaluating pipelines as assets, but also ancillary equipment such as compression equipment, pumps etc.
Sustainability, secure supply and efficiency are the watch words of renewable resources. The creation of energy that can be replaced in the same amount using equal or less time and energy than it takes to create is truly renewable, a simple definition often lost in the excitement of creating green energy. If it is solar, wind or involves the use of oil seeds to produce energy, Core Capital has experience providing capital to the producer provided the end user is a viable credit.
The drilling rig is an essential part of the oil and gas industry and is used to drill water wells, oil wells, or natural gas extraction wells. Drilling rigs can be mobile equipment mounted on trucks, tracks or trailers, or more permanent land or marine-based structures such as oil platforms, commonly called ‘offshore oil rigs’ even if they don’t contain a drilling rig. Regardless of type and in certain geographic locations Core Capital considers the current state of use, age and operator in our valuation analysis for consideration as use as collateral.
The water injection method used in oil production is where water is injected back into the reservoir usually to increase pressure and thereby stimulate production. Water injection wells can be found both on and offshore. This method is used to increase oil recovery from an existing reservoir. Additionally, during the oil extraction process, and as a function of geography and the age of the well among other things, a significant amount of water is produced as a byproduct to oil production, that water needs to be disposed of in accordance with strict EPA regulations as well as local government requirements and other governmental agencies. Core Capital has done a significant amount of work in both, Salt Water Disposal Wells (SWDW) as well as Water Evaporation Ponds (WEP).