Some of the nation's top money-center banks point out that 2002 was an absolutely anemic year for financing oil and gas M&A deals, and that up through this spring, the volume of 2003 asset-divestiture transactions in the upstream was less than robust. But investment banker Lehman Brothers, which advised on more than $73 billion worth of oil and gas/natural resource M&A transactions during 2000-02, has managed to turn M&A advisories into a springboard for greater capital-markets deal flow. This year, through late April, the firm's natural resources group advised on $6.7 billion worth of M&A transactions for the upstream, midstream and downstream sectors of the industry. It also led nearly $2.4 billion of largely related high-yield-debt offerings, primarily for E&P clients; more than $1.3 billion of upstream-slanted equity offerings; and $1.9 billion of investment-grade debt offerings. "The M&A and corporate-finance markets are closely intertwined, and we're in an environment where the concept of portfolio management is the mantra of the day," says Grant A. Porter, vice chairman and head of the global natural resources investment banking group for Lehman Brothers in New York. Porter emphasizes there are a number of major oils, as well as capital-starved energy-convergence companies, that have recognized that they are, in many ways, too big and have to more profitably manage their portfolios through the divestiture process. "Within this trend, we've defined ourselves not only as advisors to companies selling assets, but also as providers of debt and equity to the buyers of those assets." Last summer, well after Enron got self-inflicted pneumonia and the rest of the energy-convergence sector came down with the flu, Lehman Brothers-a long-time advisor to The Williams Cos.-stepped in and gave financial CPR to that ailing merchant-energy firm. Within 10 days, it raised about $4.5 billion of capital for Williams while selling about $3.5 billion of that firm's businesses. That was the first step in a restructuring process that continued into 2003, with a series of divestitures announced this April: Williams sold its interest in Williams Energy Partners; sold Texas Gas Transmission Corp. to Loews Corp.; and sold its Raton Basin, San Juan Basin and Hugoton Field E&P properties to XTO Energy. "In all three of these cases, we acted not only as financial advisor to The Williams Cos., but we also-with their permission-provided financing for the buyers," says Porter. "This latter step was particularly critical because it assured speed and certainty of deal execution in a volatile market while restoring investor confidence that The Williams Cos. could go forward as a viable entity." To assure that Williams' upstream asset sale to XTO would be consummated quickly, Lehman simultaneously led a $400-million high-yield-debt offering and a $259-million equity offering for XTO. "Notably, we accomplished the high-yield offering at 6.25%-the lowest coupon ever in the history of high-yield offerings for a BB-rated company," says Porter. "In addition, we had a book of interest for that deal that was three times the size of the transaction. What all this indicates is that the high-yield market is very liquid, very accessible for non-investment-grade oil and gas issuers. This year, through April, we've seen about $12 billion of positive inflows into high-yield mutual funds versus $10 billion of positive inflows into those same funds-for all of 2002." The institutional loan B market-institutions that buy loan product-has also become extremely liquid, he says. "A lot of fixed-income institutions are now big players in the non-investment-grade, leveraged-finance market, and they're providing efficient bank debt. This, too, is helping us get great execution for our non-investment-grade clients." During the first four months of 2003, Lehman Brothers advised on eight energy M&A deals and executed 22 largely related capital-markets transactions. Says Porter, "Representing both the buyer and seller in M&A deals-with the transaction sweet spot in the $500-million to $1.5-billion range-is something we'll be doing a lot more this year, at a time when speed of execution and minimizing market risk is critical to both parties."