11 Aug “Overheard in the Corridor”: Large & Evolving Opportunity Set
August 11, 2015
“Overheard in the Corridor”:
Large & Evolving Opportunity Set
Early 2015 has seen relatively low natural gas and oil prices, which has put pressure on share prices of energy companies and has reduced their capital availability. With this capital constraint, upstream companies are seeking to optimize operations by divesting their non-essential costs and reallocating the capital.
This presents a large opportunity for CorEnergy to provide energy producers and operators with alternative financing when other sources are inefficient or non-existent. The operator is able to divest non-core assets, while maintaining operational and commercial control by leasing the asset back from CorEnergy.
We estimate that the E&P operator can command a 10% to 15% return through an asset sale to CorEnergy, providing cash that can be used for higher returning investments, such as drilling wells. This optimization of capital allows the operator to maintain its current debt and equity structure and provides predictable, long-term operating costs.