In one of the only financings of a new-build off-shore oil/gas unit so far this year, Milbank, Tweed, Hadley & McCloy LLP has advised BBVA, HSBC, Sabadell and Santander in providing non-recourse project financing to fund construction and operation of two offshore drilling units to be owned by affiliates of Grupo R for oil and gas exploration by Mexico’s state-owned petroleum company Pemex (Petróleos Mexicanos).
The financing closed on March 16 and was led by Milbank Global Project Finance partners Dan Bartfeld (practice group leader) and Roland Estevez. It was the first successful vessel-related financing transaction in 2016 involving Pemex.
Pemex will lease the KFELS B-class mobile offshore, self-elevating drilling rigs – commonly known as jack-ups – from affiliates of leading Mexican energy infrastructure company Grupo R. Regarded as a workhorse for major offshore exploration, the KFELS B-class rigs, mounted several stories high over the water’s surface, are able to operate in shallow waters (depths up to 400 feet), with a drilling depth exceeding 30,000 feet. They are also known for best-in-class design for safety and environmental engineering features, with minimal emissions and discharges.
“This would be a significant financing in any environment, but it’s especially impressive given the downturn of the global commodities markets,” said Mr. Bartfeld. “It demonstrates that as long as you have a strong sponsor, sound financial structuring and the demand of a producer of the scale of Pemex, you’ll still see a healthy international appetite for oil and gas assets coming out of Latin America.”
Mr. Estevez added, “Mexico has become the most important energy market in Latin America. Although the implementation of historic energy reforms has taken longer than expected, the reforms have started to bear fruit as the government continues to support partnerships with foreign producers.”
Also part of the Milbank financing team representing the lenders were Global Project Finance associates Alejandra Garcia Garcia, Jennie DiFiore and Mark Greenfogel. Milbank has played a key part in Pemex’s offshore exploration efforts for many years, working on previous Grupo R financings and the development/financing of other Mexican and international companies focused on the Mexican offshore sector.
About Milbank
Milbank, Tweed, Hadley & McCloy LLP is a leading international law firm that provides innovative legal services to clients around the world. Founded in New York 150 years ago, Milbank has offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, São Paulo, Seoul, Singapore, Tokyo and Washington, DC.
Milbank’s lawyers collaborate across practices and offices to help the world’s leading commercial, financial and industrial enterprises, as well as institutions, individuals and governments, achieve their strategic objectives.
