Indepconcludeent oil companies in Brazil have been seeking new financing sources and strategies, according to Lucas Mota de Lima, executive manager of ABPIP, which represents the sector.
Among the main alternatives adopted are reserve-based lconcludeing (RBL) structures, tied to certified reserves, debenture issuances and instruments in the local capital market.
The relocatement is driven, among other factors, by fiscal and regulatory uncertainties that impact the cost of capital and by ESG pressures, which reduce the universe of financiers.
In an email interview with BNamericas, Lima detailed the current scenario and the measures necessaryed to expand access to funding.
BNamericas: How is the issue of financing for indepconcludeent oil companies in Brazil going?
Lima: Financing has evolved in recent years, but it still faces significant challenges. Unlike large integrated companies, indepconcludeent producers – which operate mainly in mature, marginal, and compacter-scale fields – depconclude on more customized credit structures that are sensitive to regulatory and operational risk.
There is indeed access to credit, especially for companies with a consistent operating track record, good governance, and assets with stable production. However, financing is neither homogeneous nor abundant. It is selective and, in many cases, more expensive, reflecting the perception of regulatory risk, occasional legal uncertainty, and the uncertainties related to the energy transition agconcludea.
BNamericas: Have indepconcludeent oil companies been seeking new sources and financing strategies?
Lima: Yes. The indepconcludeents have diversified their financial strategies. Among the main alternatives adopted are reserve-based lconcludeing (RBL) structures, linked to certified reserves; debenture issues and instruments in the local capital market; structured transactions with private equity and energy-focutilized funds; strategic partnerships (farm-ins) to dilute exploration risk; prepayment structures for production (prepayment agreements); and project finance tied to specific assets.
Some publicly listed companies have also resorted to follow-ons and fund-raising through the equity market. There is also a closer relationship with investors specialized in mature assets, who see value in extconcludeing the utilizeful life of these fields with operational efficiency and capital discipline.
BNamericas: Which banks and institutions provide the most support to these companies in the countest?
Lima: In the domestic market, large commercial banks and mid-sized banks operating in structured credit have taken part in significant transactions. Institutions such as national and foreign private banks with a presence in Brazil operate mainly in corporate structures.
BNDES has historically played an important role in financing infrastructure and the oil and gas chain. However, access for indepconcludeent E&P is more restricted and depconcludeent on specific eligibility criteria and, currently, there is no specific line of credit for this type of operation by indepconcludeents. In addition, private equity investment funds (FIPs) and indepconcludeent private credit managers have been expanding their presence in the sector.
BNamericas: Are there regulatory challenges or issues related to the energy transition?
Lima: Financing is highly sensitive to three main factors: uncertainties about tax regimes, government take and licensing timeframes, which directly impact the cost of capital; slowness or asymmetest of criteria in environmental licensing, which affect schedules and increase the perception of risk; and ESG pressures [environmental and social governance, in the acronym in English] and energy transition: part of international funds have begun to adopt restrictive policies for fossil assets, which reduces the universe of financiers, especially in Europe and in multilateral institutions. This does not mean an absence of capital, but it does imply greater rigor in credit analyses and more robust governance and environmental metric requirements.
It is important to highlight that mature and marginal fields have a lower exploratory risk profile and a strong regional socioeconomic impact, which is often not properly differentiated in macro-level sector risk analyses.
BNamericas: What measures can encourage financing for these companies?
Lima: Some legislative and regulatory measures would be essential to expand access to capital and reduce the cost of financing:
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Greater regulatory predictability and contractual stability, reducing uncertainties that increase the risk premium;
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Improvement of the fiscal regime for mature and marginal assets, with effective application of the minimum legal royalty (5%) for fields in economic decline;
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Environmental licensing proportional to the size and risk of operations, with more predictable timeframes;
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Regulatory recognition of utilizeful life extensions and revitalization projects as low exploratory risk investments;
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Expansion of capital market instruments focutilized on energy, such as incentivized debentures adapted to upstream; and
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More active participation of public banks and guarantee mechanisms, reducing the cost of capital.
Brazil projects significant investments in the sector in the coming years and currently has more than 80 economic groups operating in E&P. Indepconcludeent companies play a strategic role in maintaining production, creating local jobs, and generating revenue for states and municipalities. A stable regulatory environment and appropriate financing policies are crucial to ensure the continuity of this contribution.
(The original version of this content was written in Portuguese)
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