1. RELIABLE RESERVES®
SPV purchases forward production of xx volumes of hydrocarbons (traditional pre-pay transaction)
Prepay volumes are valued at the forward price curve
Avoid FAS 133
Reserves are modeled based on deterministic and probablistic analysis rather than “rules of thumb”
Higher advance ratio than traditional VPP or senior financing at comparative rates
A Reliable Reserves transaction provides the client with the most leverage at the lowest cost available in the industry.
RESULT:
Client receives more leverage at competitive costs resulting in higher returns on equity capital employed.
Example
Client is considering making an acquisition of proved properties with development potential
Reserves are long-lived, well established production
Proved reserves consist of 63% PDP, 7% PDNP, 30% PUD
Unrisked PV10% is valued at $387MM
Risked purchase price is $318MM (PV15%)
Bank advance - $165MM
Traditional VPP - $186MM
Reliable Reserves - $268MM
ROE
15.41%
18.85%
17.91%
23.89%

2. TERM WORKING INTEREST®
Monetize long life PDP properties that generate a low yield on capital employed
Purchase xx% of working interest in specific units in a given field using forward price curve
Tenor: 2 to 7 years
Working interest will revert back to Client after tenor
Utilize NOLs
Avoid FAS 133
Release capital for deployment in higher return investment opportunities
Lower $$/BOE cost in acquisition
Hedge near-term revenues and expenses while retaining value of future cash flows
Enron’s Term Working Interest structure allows producers to monetize PDP reserves without selling the entire future cash flows which optimizes the time value of producing reserves.
RESULT:
Client hedges near-term revenues and expenses while retaining value of future cash flows. Capital can be deployed in higher return opportunities.
Example
Client is considering selling long-lived PDP properties. Proceeds will be used to reduce leverage
Gain on sale will be used to offset NOLs, increases book equity value
PV10% value is $544MM
SPV is created to purchase 47.5% of Client’s working interest for 5 years for $150MM
Client continues to operate and retains 52.5% of working interest generating $215MM of cash flow during tenor of transaction
After tenor of transaction, Client owns 100% working interest with a valuation of $364MM based on today’s economics