In the face of recent changes in
commodity pricing, unpredictable equity capital markets, and the
growing importance of scale in Canadian energy development, many
leading energy management teams are seriously considering private
equity funding alternatives, including the equity line of credit
Stikeman Elliott has market-leading
expertise in this area and we have prepared an overview paper
entitled The Oil & Gas Equity Line of Credit which
the key commercial terms of an ELOC
a market survey of ELOC economic returns in Canada
frequently asked questions about ELOC funding
the 41 private equity energy sponsors that have been active in
Canada in recent years
Our objective in preparing this
publication is to support Canadian managers in evaluating,
accessing and implementing this source of funding.
Key Terms of the ELOC
The key terms of the ELOC include
specifying the economic formula for the sharing of the future
returns between the sponsor and management and the governance
rights of the sponsor, including the operation of the board,
controls over key decisions and the power to change the management
team. We have summarized these approaches and identified all of the
key commercial issues that managers should consider. A sample form
of letter of intent for an ELOC is also available on request in
order to help shape management's analysis of deal terms.
Potential Returns of Management Teams
The paper analyzes the economic terms
of a representative sample of Canadian energy ELOCs (established
between 2006 and 2014) to determine a range of potential returns on
equity and incentive promotes for teams, based on different growth
Frequently Asked Questions
The Oil & Gas Equity Line of
Credit answers key questions faced by management teams
considering an ELOC, including:
How do I connect with sponsors?
Should I assemble a board?
Do I need to come to sponsors with an asset?
Can I get support for G&A while I look for an asset?
The paper describes the investment
focus and Canadian activity of 41 sponsors that have been active in
We have relationships, or directly work
with, all of the sponsors described in The Oil & Gas Equity
Line of Credit, and we would be pleased to make introductions
to funds for qualified management teams.
Private Equity Funding Reception
Stikeman Elliott is hosting a reception
at 4:30 pm on Thursday, June 25 to discuss this paper and other
observations from the firm's lawyers regarding the energy
private equity market. Oil & gas managers considering
private equity funding are invited to attend.
For a copy of The Oil & Gas
Equity Line of Credit or to register for the June 25
reception, please contact Stikeman Elliott LLP at
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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