A reserve based lending facility restructured for a mid cap producer operating across two basins. The brief was simple to state and hard to do: lower the cost of capital without adding barrels of risk the balance sheet could not carry.
The situation
The operator had grown through acquisition and was carrying three overlapping facilities, each priced off a different reserve report. Redetermination season was punishing, and every price dip forced a fresh round of covenant conversations.
What we did
- Re-underwrote the reserves from the wellhead up, on our own decline curves rather than the arranger’s.
- Consolidated three facilities into a single borrowing base with one redetermination calendar.
- Sized a collar programme against the actual hedged barrels, not a round number.
- Staged drawdowns to the development programme so capital was not sitting idle.
The point was never the headline rate. It was making the facility survive a bad strip without a covenant breach.
The outcome
Net yield to the portfolio improved by roughly thirty percent, and the producer went through the next price dip without a single covenant waiver. The structure has since been reused as the template for two further upstream mandates.