Elaine Maslin, 20th June 2012
The North Sea’s independent oil and gas operators are being constrained by tough capital markets and limited availability of rigs and people, an industry breakfast was told yesterday.
A trio of independents said the continued economic turmoil in the eurozone meant equity markets were fickle.
In addition, bank debt was hard to come buy and skill shortages were adding to the strain, leaders of the firms told the Oil and Gas UK breakfast event in Aberdeen.
Letters of credit being required by contractors and other operators selling assets were also costing smaller companies by tying up tens of millions of pounds that could otherwise be invested, the gathering in the Aberdeen Exhibition and Conference Centre was told.
Nautical Petroleum commercial director Paul Jennings said: “The equity market is fickle; it is quite easy in east Africa at the moment but not in the North Sea, and there are times when it is closed.
“2008-09 was a very interesting period for a lot of small companies and a lot didn’t survive. We were fortunate to have funds and used them wisely. We trade assets to generate cash and we have also been very successful in farm-outs, so when we have spent money it has been partners’ money.”
Tom Reynolds, chief executive at Bridge Energy, said getting bank debt required already having a balanced and derisked portfolio and the equity markets were risky, depending on how companies told their story, used the cash and how that was received in the market.
He also said getting staff and resources such as rigs was an issue.
Mr Reynolds told the 400-strong audience: “Access to people in this market is tough, in Aberdeen and in Oslo. It is also a tight market for drilling resources, especially when it comes to a company of our size looking for one well, not a programme of wells, which means sometimes we struggle.”
Ian Sharp, chief operating officer at Fairfield Energy, said the demands of the private-equity market meant firms had to now question if their businesses met the needs of the market. Time frames were proving longer, he added, taking five to six years between licence applications and drilling, up from two to three previously.
Norway-listed Bridge Energy is looking to list on the Alternative Investment Market, in London, its CEO said yesterday.
Speaking at the business breakfast, Mr Reynolds said the North Sea-focused firm which had a market capitalisation of about £64million was looking to broaden its investor group outside the Oslo stock exchange. He also said Bridge was looking to take part in eight exploration wells over 18 months in the UK and Norwegian North Sea.