BNP Paribas closed an exceptional US$230mn development financing for Nigerian oil company Afren Okoro in March 2007. The deal marks the first single pre-production financing ever closed in Nigeria.

The financing was raised by BNP Paribas and a syndicate of lenders to finance the development of the Okoro field, located in shallow offshore Nigeria in the southwest region, up to first oil and then to support further capital expenditure.

The borrower is Afren Okoro, a special purpose vehicle set up by Afren plc, a start-up upstream company listed on the London AIM. Due to this financing, the company is establishing its first barrel of production in 2008.

“BNPP got involved in the transaction due to its intense focus on developing long-term relationships with young emerging Africa-focused companies that have the potential to grow into well established leaders of the industry,” comments Olivier Serra, head of the upstream oil and gas group, structured debt, Europe, Middle East and Africa, BNP Paribas.

The deal was structured as a solid project financing with a special purpose vehicle borrower. During construction, it has recourse to project sponsor Afren Plc and other subsidiaries of the Afren group, and is non-recourse post-completion.

However, the outstanding aspect of the deal is that it did not benefit from a solid completion guarantee from a creditworthy entity. The funds were made available to a company that had no other cashflow generating assets and no solid balance sheet. This meant that the financing was essentially raised based on the merits of the reserves, development plan and capacity of the Afren management to deliver on its business plan.

The financing was split into a five-year US$200mn borrowing base development facility and a five-year US$30mn letter of credit. Total equity provided, including early project cashflow, amounted to a further US$83mn. The US$230mn was syndicated out to the commercial market. Calyon, Natixis, Standard Bank, Guarantee Trust Bank and KBC Bank all took part in the facility.

BNPP also provided a non-syndicated standby letter of credit (SBLC) facility, covering performance bonds required, and a US$5mn equity investment.

Afren Plc was the project sponsor and the main contractors involved were Global Santa Fe, FPSO Bumi Armada, UWG and Deepflex.

This structure brought a number of benefits to the borrower, as BNPP’s Serra explains: “This deal has the flexibility to be increased and reflect reserves value over time. It also has an additional LC facility to provide contractor LCs and performance bonds required for the construction phase, as well as an additional US$5mn equity injection from BNPP to help meet the equity component required.”

Putting together the deal presented a number of challenges for BNPP and entailed a very detailed technical due diligence from the bank’s in-house petroleum engineer, critical financial modelling and stress testing, as well as the need for the bank to develop a solid understanding of the transaction in order to convince other banks joining the facility.

From a country risk perspective, there were a number of issues to be aware of and risks to mitigate. The project is located in Nigeria, offshore in the Niger Delta, and established through a partnership via a service agreement with an indigenous company (Amni International), which owns the licensing rights to the oil block. This considerably enhances the country risk component of the deal.

The facility was also underwritten and funded during a time of heightened political uncertainty in Nigeria due to the elections taking place in April 2007.


Deal Information



Afren Okoro
Sponsor: Afren
Amount: US$230mn
Mandated lead arranger: BNP Paribas
Additional lenders: Calyon; Natixis, Standard Bank; Guarantee Trust Bank; KBC
Tenor: 5 years
Law firms: Linklaters (lenders); Herbert Smith (sponsors)
Date signed: March 2007