Financing Business Opportunities in Oil & Gas

RCCG COD Oil and Gas Investment Opportunities in Nigeria November 2011
Segun Olujobi

Introduction - Financing Ventures

Raising finance is tough Debt, Equity, Expansion Capital or Acquisition Capital Depending on the business and where you are in the business life cycle, it could
take years and require multiple rounds

Why is to so difficult to raise finance? Financiers are taking major risk in financing entrepreneurial business. Thank God they are careful. This is the reason why deposits and pensions
are safe

Entrepreneurs need to be focused, steadfast and unrelenting once they are sure
that the direction they have chosen is of the Lord.

Howard Schultz of Starbucks approached 242 people and was rejected 217
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times before he procured financing.

Jeff Bezos Financing Spectrum

July 1994
Amazon.com concept

October 1994 and February 1995

Amazon.com incorporation and launch

December 1995
Amazon.com operating

1996

May 1997

------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Amazon.com growing Amazon.com exponeential growth

Capital from personal savings

Capital from mother and father * 582,528 shares of common stock sold to father for $100,000

Capital from Angels

Capital from venture capitalists *Raised $8 million from KPCB at a $52 million premomey valuation

Capital from IPO

* $15,000 Interest free loan

*Raised $981,000 at a $5million premoney valuation

*Raised $54 million

* $10,000 equity investment for 10 million shares of common stock

*847,716 shares of common stock sold to mother for $144,000

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Source: Entrepreneurial Finance, Steven Rogers

Generic Financing Spectrum

Concept

Personal Sources of Finance

Prototype

Family and Friends

New Product

Angel Investors

Growth

Venture Capital

Profitable

Public or IPO

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Sources of Capital
Owner Equity Equity from friends and family Bank loans Trade credits

Angel Capital
Venture Capital Based on global
statistics over 60% of start-up funds comes from entrepreneurs with remaining 38% coming from external sources are the second source of financing

Loan granting financial institutions

Venture and Angel investors provide the least capital to start-ups and small
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business

Capital Providers Look For Few Things

Equity Providers Credit Providers

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A solid promoter or entrepreneurial team Management track record Knowledge of the business Clear line of sight to capital repayment or exit

Character Collateral Capital Capacity Conditions

Financing Requirements Vary Depending On Business Focus

E&P

Marketing

Midstream Infrastructure

Downstream

Services

Oil and Gas tends be generally capital intensive

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Financing Requirements Vary Depending On Business Focus

E&P financing stages and funding types

Exploration Equity Green Field Development Project Finance Producing Field Development Reserved based lending

Other Financing - Loans

Midstream financing stages and funding types

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Concept Development - Equity Construction Project Finance typically tied to off-take agreements from credible sources Other Financing - Loans

Financing Requirements Vary Depending On Business Focus

Services Very broad. Varies from Catering to Engineering Services

Concept Development - Equity Equipment acquisition Equity, Loans, Leasing, Supplier Finance Business expansion Loans and other loan variations

In a number of cases buyer finance can be assessed

Having firm contracts from credible companies is key to raising finance for services

Project driven services require great care to finance as can be seen in next slide

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Project Driven Services More Susceptible To Economic Cycles , Therefore More Difficult To Finance.

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Source: ACA , 2010

GENERAL DISCUSSION, CASES AND QUESTIONS

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