Orrick's Leah Sanzari and Jonathan Ayre spoke with Structured Credit Investor regarding innovative transactions involving securitizing interests in oil and gas wellbores. They recently advised on the first two such securitizations of wellbore interests owned by Raisa Energy and Diversified Gas & Oil, respectively.
These transactions represent an "exciting collaboration between the oil and gas sector and the ABS industry," said Leah. "Investors have been particularly interested by the transactions because they provide access to an asset class previously untapped via securitization, while providing comparable structural protections as other traditional securitizations, such as a bankruptcy remoteness and cashflow triggers. The transactions equally provide access to mature, stable cashflows that can be modelled and rated by the rating agencies."
Jonathan explained that "the appeal of older wellbores is that they come to provide stable and predictable production which, combined with an effective hedge, can then translate to reliable long term returns for investors and an even more attractive investment prospect." He added that, "there is huge interest on both the issuer and investor side in these transactions, and I certainly think we'll see more of these in the near future."