A $1.1bn programme debt financing for Nigeria National Petroleum Corporation, NNPC, and Exxon Mobil Natural Gas Liquids, NGL2 liquids producing asset has been launched to the bank market by Standard Chartered and United Bank for Africa, UBA Plc.

Project Finance International said the deal is described as a programme financing rather than a project financing as the raising of debt will not be linked to a specific project. But the proceeds will be used towards drilling more oil and gas wells to serve the NGL2 plant.

The loan tenor is seven years. Exxon Mobil is providing 51 per cent of the loan and the rest, uncovered by any multilateral agencies, is intended to be supplied by international and local banks. The debt will run side_by_side with the $1.275bn debt arranged by Credit Suisse in 2004, which had a direct loan tranche from US government agency, OPIC. This loan runs for a further five years.

The NLG2 asset can support a good deal more debt as its cash flow is more than $500m pa. Indeed, given that the new loan is structured as a programme financing, it is intended to raise more debt on the asset in another debt deal next year.

Banks will be asked to bid on pricing, with bids due back in early December. A year_end closing is planned for the loan. Pricing indicated in the financial model is 350bp.

This equates to the pre_completion margin on the 2004 deal with the margin being offered on a post_completion operating asset. The issue for banks considering the deal will be Nigerian risk, although the scheme is an export project.

International banks are being offered a top ticket of $100m each. The local bank market is expected to absorb between $100m and $200m of the deal. Part of the new financing will take out all of the three_year $265m term loan put in place last year to cover completion costs on the NGL2 scheme.

NNPC and Exxon are hoping to smooth the deal flow to banks in the coming years. Between 2004/5, when the first NGL2 and first satellite oil field financings were transacted, and 2008/9, when the extra NGL2 bridge and term loans were put in place, was a significant time gap.

This time, it is hoped that the new NGL2 deal will be followed quickly by more loans from the NGL2 programme and by a significant new satellite financing, the $4bn Satellite 2 oil field financing.

In late 2005, the first satellite oil field financing was signed at a pre_credit crunch margin of 175bp. The scheme was a project financing and directly funded three new oil fields. The seven_year uncovered deal was split into a $270m international loan, a $90m local bank loan and a $250m direct loan from ExxonMobil.

Satellite 2 will follow a similar structure but will be a lot bigger. The second financing will benefit from cash flows from the first deal, so construction risk will be mitigated to some extent. However, the risk profile will obviously be different to NGL2.

Credit Suisse, Credit Agricole, Natixis, RBS, SG, Standard Chartered and WestLB transacted the first deal. The local banks were IBTC, UBA, Guaranty Trust, Zenith Bank, Access Bank and First Bank. The second deal will be a lot bigger and is said to be akin to the size of the Jubilee oil field project in Ghana.
There are further deals planned in Nigeria. Work on the $2bn corporate_style loan for the Nigeria LNG Limited, NLNG, scheme has restarted. It was pushing forward during the summer but was delayed by political issues. Standard Chartered and UBA are working on the deal.

It is believed that part of the new loan will be used for upstream gas_gathering facilities to ensure gas supplies to the existing six trains. The US$1bn project loan from 2002 on the asset has nearly been repaid. NLNG is a consortium made up of NNPC, Royal Dutch Shell, Total and ENI.