KBRA releases research on proved, developed, and producing (PDP) natural gas and oil securitizations. The report provides an overview of features observed in KBRA-rated PDP securitizations as well as a general discussion of this type of asset-backed security (ABS) transaction that experienced a meaningful increase in activity in 2022 with seven deals totaling $3.1 billion.

Key Takeaways

• PDP securities are mainly collateralized by cash flows generated from PDP wells (sold into a trust) that have a record of producing commodities such as natural gas, natural gas liquids, and/or oil.
• PDP ABS are a form of operating asset ABS where the interest and principal payments on the trust securities are repaid by the cash flows generated from the sale of commodities produced from the underlying assets used in the natural gas or oil producing business.
• PDP transaction structures often feature overcollateralization, subordination, amortization, and accelerated paydown triggers. They also include hedge contracts that guarantee minimum prices for hedged volumes over a defined time horizon.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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