Video: North Sea acquisitions market to stay ‘hot’, experts say at EV event

The North Sea will be a hotbed of merger and acquisition (M&A) activity if the oil price holds up, the audience heard at a bumper breakfast event in Houston today.

Kris Nicol, director of corporate research at Wood Mackenzie, said he did not expect the North Sea M&A market to quieten down following the expected sale of US major Chevron’s UK business.

Mr Nicol said some independent US oil firms who are still in the basin could be looking to sell assets, while majors BP and Shell continue to “high grade” their portfolios.

He was speaking at the Press & Journal and Energy Voice’s fifth annual business breakfast in Texas during the week of the Offshore Technology Conference.

The breakfast was attended by record numbers, with well over 200 delegates turning up to learn about the M&A market and supply chain opportunities in the UK and North America.

The expert panel at the event was chaired by Matt Abraham, supply chain director at Oil and Gas UK (OGUK).

Panellists included Mr Nicol; Alan Dick, Simmons Energy; Findlay Anderson, Baker Hughes GE; Grady Ables, Apache; Alasdair Freeman, Burness Paull; and Erin Hopkins, Baker Botts.

Burness Paull was the principal partner for the event, which was supported by the Aberdeen-Houston Gateway and JFD. Munro’s was the travel partner and Singapore Airlines was the airline partner.

The theme was “changing of the guard”, a phrase used with increasing regularity to describe the current dynamic in the UK North Sea, where international companies have made room for newer players, often backed by private equity.

The M&A market was dead during the first few months of the year as investors waited to see whether the oil price drop at the end of 2018 was just a blip or the start of a more sustained slump.

But activity came back with a bang in the second quarter, with private-equity-backed Chrysaor clinching a £2 billion deal to buy US oil firm ConocoPhillips’s UK businesses.

The other large package of UK North Sea assets which is widely known to be up for grabs at present belongs to US major Chevron – and Israel-headquartered Delek recently emerged as a frontrunner for that portfolio.

Mr Nicol, who delivered a presentation on M&A at the event, said the North Sea acquisition market was likely to remain “hot” in the short term, but that the oil price would need to be stable.

He said Woodmac was tracking 32 potential deals worth more than £7bn that could happen across the UK, Norwegian, Danish and Dutch sectors of the North Sea.

In the UK sector alone, 18 possible deals worth £6.7bn could be in the pipeline, Mr Nicol said.

Mr Dick said there was an “appetite for deals” and that he expected to see a number of transactions in the second half of the year.

He said: “It’s going to be a busy end to year, but the oil price needs to stay where it is.”
Mr Dick also predicted more consolidation would take place further down the supply chain.

He said: “We’ve already seen tier one consolidation and I suspect that has largely been delivered.

“The real opportunity and what we’re excited by is the potential tier two and tier three consolidation.

“There is still a very large, diverse supply chain and end clients are looking for integrated services.”

Mr Ables said new entrants coming into the UK North Sea was “a great thing”.

“Players are coming in that want to invest in assets, drive production and extend the life of assets,” he said.

“On the theme of changing of the guard – we were a bellwether for that when we bought the Forties field in 2003 and Beryl in 2012.

“New players will create more opportunities for us as well. It means there are more operators in the basin who are aligned with our vision.”

Mr Freeman said decommissioning liabilities was one of the main factors – other than the oil price – in determining whether a deal goes through or hits the rocks.