Presidio Strengthens Financial Position with $350 Million Investment-Grade ABS Refinancing
Presidio Production Company, a U.S.-focused oil and gas operator specializing in the acquisition and optimization of mature producing assets, has successfully completed a $350 million investment-grade refinancing of its existing asset-backed securitization (ABS) program. The transaction marks a significant milestone for the company, lowering its cost of capital, improving liquidity, and enhancing free cash flow available for shareholder returns and future growth initiatives.
The refinancing replaces Presidio’s previous ABS structure with a more efficient financing arrangement carrying a weighted average coupon rate of 6.38%, substantially lower than the 8.22% weighted average coupon associated with the prior facility. The reduction of 184 basis points is expected to generate meaningful savings in interest expenses while also decreasing scheduled debt amortization requirements.
According to company leadership, the refinancing demonstrates the strength of Presidio’s financing strategy and highlights the growing importance of the ABS market as a source of capital for upstream oil and gas companies focused on producing developed producing (PDP) assets.
New ABS Structure
The newly issued ABS consists of two investment-grade tranches totaling $350 million. The first tranche includes $175 million of Class A-1 notes carrying a fixed coupon of 5.902%, while the second tranche consists of $175 million of Class A-2 notes with a coupon rate of 6.717%. Both note classes mature in 2041, providing long-term financing stability and reducing near-term refinancing risk.
By securing investment-grade debt at lower rates, Presidio has strengthened its balance sheet while creating additional financial flexibility. The company emphasized that the new structure not only lowers borrowing costs but also improves cash flow generation by reducing annual debt service obligations during the early years of the financing.
A key feature of the transaction is the implementation of an Anticipated Repayment Date (ARD) structure, which reduces annual amortization requirements during the first five years of the notes. This allows the company to retain more cash for operational needs, acquisition opportunities, dividend payments, and strategic initiatives.
Strategic Use of Proceeds
Proceeds from the refinancing were deployed across several areas designed to strengthen Presidio’s financial position.
Approximately $263 million was used to retire the company’s previous ABS debt, including accrued interest and make-whole obligations associated with the earlier financing structure. This effectively replaces higher-cost debt with lower-cost capital.
Another $37 million was directed toward paying down borrowings under Presidio’s reserve-based lending (RBL) facility. The company noted that the RBL remains intact with a borrowing base of $65 million and is now completely undrawn, giving Presidio access to additional liquidity should opportunities arise.
The refinancing also funded approximately $35 million of additional commodity hedges, further strengthening the company’s risk management strategy. Remaining proceeds were allocated to transaction-related expenses, fees, and general corporate purposes.
Following the closing of the transaction, Presidio maintains a simplified capital structure with enhanced flexibility and significant available liquidity.
Management Highlights Competitive Advantages
Will Ulrich, Chairman and Co-Chief Executive Officer of Presidio, described the refinancing as a transformative event for the company.
He emphasized that lowering the cost of capital, reducing near-term interest expenses, and decreasing debt amortization obligations creates a stronger financial foundation while positioning Presidio to pursue additional growth opportunities. According to Ulrich, the transaction also underscores the advantages of combining an ABS warehouse facility with access to a deep and efficient securitization market.
This financing model provides Presidio with a comprehensive solution for funding PDP acquisitions, an area where the company continues to focus its growth strategy.
John Brawley, Executive Vice President and Chief Financial Officer, echoed those comments, highlighting the competitive edge gained through lower financing costs.
Brawley noted that access to lower-cost capital enables Presidio to evaluate and pursue acquisition opportunities more aggressively than competitors operating with higher financing expenses. By maintaining attractive shareholder returns while improving acquisition economics, the company believes it is well-positioned to continue consolidating mature producing oil and natural gas assets across the United States.
Innovative Features of the ABS
Beyond lowering borrowing costs, the refinancing introduces several structural enhancements that management believes will support future growth.
The ABS has been structured using a master trust framework that incorporates innovative make-whole provisions designed specifically for the oil and gas sector. According to Presidio, these provisions provide increased flexibility for future asset dropdowns, refinancings, and acquisitions while helping maintain a streamlined capital structure.
The notes also include an attractive redemption schedule. Presidio may redeem the securities at 102% of principal before the end of the first year, 101% before the end of the second year, and at par value thereafter. This feature provides the company with significant flexibility should market conditions create opportunities for additional refinancing or strategic transactions.
Management believes these innovations establish a financing platform capable of supporting long-term growth while maintaining financial discipline.
Expanded Hedging Program Enhances Stability
Concurrent with the refinancing, Presidio executed a hedge restructuring designed to provide additional protection against commodity price volatility.
The company maintains a comprehensive portfolio of oil, natural gas, natural gas basis, and natural gas liquids (NGL) hedges extending through multiple years. These hedges are intended to protect cash flows and support debt service requirements while reducing exposure to fluctuations in commodity markets.
Oil Hedge Portfolio
Presidio has established significant oil swap positions extending through 2029 and beyond. Oil hedge volumes range from approximately 241,000 to 274,000 barrels during individual quarters in 2026 and 2027.
Average strike prices vary across the portfolio, beginning around $57 to $60 per barrel in portions of 2026 and reaching higher levels above $100 per barrel for certain 2027 positions. Long-term positions continue through 2029 and beyond, providing ongoing protection for a substantial portion of expected production.
Natural Gas Protection
The company also maintains extensive natural gas swap positions. Quarterly hedge volumes generally range between 5.4 million and 6.3 million MMBtu through 2027.
Average natural gas strike prices begin above $6 per MMBtu for near-term contracts and gradually decline to levels closer to prevailing market expectations in later years. The hedge portfolio extends well beyond 2027, supporting long-term cash flow visibility.
Natural Gas Basis Swaps
In addition to outright commodity swaps, Presidio has implemented basis hedges covering substantial natural gas volumes. These contracts help protect realized pricing by reducing exposure to regional price differentials between local markets and benchmark indices.
Basis hedge volumes exceed 5 million MMBtu in several quarters and continue into future years, further strengthening the company’s risk management program.
NGL Hedging Strategy
Presidio’s NGL hedge portfolio covers significant volumes extending through 2029 and beyond. Quarterly hedge volumes generally range between approximately 447,000 and 556,000 barrels.
Average strike prices range from approximately $21 to $27 per barrel depending on contract timing and market conditions. These hedges help stabilize revenue generated from NGL production while supporting broader cash flow objectives.
Positioned for Growth
The refinancing arrives at a time when consolidation opportunities remain abundant across mature U.S. oil and gas asset markets. Companies with efficient financing structures are increasingly able to compete for producing assets that offer stable cash flow and operational optimization potential.
With lower borrowing costs, an undrawn reserve-based lending facility, expanded hedge protection, and a more flexible ABS structure, Presidio believes it is positioned to capitalize on acquisition opportunities while continuing to prioritize shareholder value.
The company’s strategy centers on acquiring mature producing assets and enhancing their performance through operational efficiencies, disciplined capital allocation, and prudent financial management. The newly completed refinancing strengthens the foundation supporting that strategy and provides additional resources to pursue growth while maintaining financial stability.
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