What is a Stream?
A stream is a contract to purchase a percentage of an oil & gas company’s production from a specific license or a field.
It is not an agreement to take any interest in the oil & gas company’s license.
The purchase is financially settled, FlowStream does not take physical product.
In summary a stream is very much like a royalty except it is created to solve a funding need.
When to Stream
SITUATIONS WHERE A STREAM CAN PLAY A ROLE
When Requiring Capital For Development Capex
When Seeking Capital For An Acquisition
When Seeking To Reduce Exposure To An
Asset (Farm-down Replacement)
When Looking To Reduce Leverage
(Is Not Accounted For As Debt)
When Looking To Alleviate Financial Covenants
(Does Not Reduce Ebitdax)
When Would FlowStream Invest?
FlowStream’s streams are typically available before debt funding becomes available in the field’s life cycle.
Rationale for Streaming
- Not treated as debt under IFRS/GAAP
- Not treated as debt by rating agencies
- No coupons
- No bullet payments
- No redeterminations
- No amortisation schedule
- No long due diligence process
- No multiple, bureaucratic credit committees
- No derivatives treatment
- No mark-to-market in your accounts
- No “hidden options pricing”
- Highly flexible to match your assets’ operating characteristics
- No required incremental public disclosure
- Sometimes a stream’s cost of capital is cheaper than debt
- Cheaper than equity
- No dilution to existing shareholders
- Faster than an equity issuance
- No stock overhang
- No underwriting fees
- No offering documents
- No changes in bookable reserves
- No change in production forecasts
- No new participant in the JOA or Technical Committees
- No dilution of votes in the license
- Usually no government/regulatory approvals post signing