North Sea oil and gas is on the crest of a “third wave” in its evolution following a series of major deals worth more than $6billion (£4.8billion), energy professionals have claimed.
Shell’s recent £3billion sale of North Sea assets to Chrysaor is expected to be a catalyst for more mergers and acquisitions in the UKCS following the resurgence of oil-focused equity capital market investment.
It is thought former Centrica chief Sam Laidlaw is narrowing in on a deal to buy up Engie’s upstream assets through his vehicle, Neptune Oil and Gas, backed by Carlyle Group and CVC Partners.
In the last six months £4.9billion worth of North Sea assets have changed hands, including last week’s £993million acquisition of Ithaca Energy by Israeli-based Delek Group.
The Chysaor deal, led by Phil Kirk and backed by EIG Partners as well as a reserve-based lending package from a consortium of banks, also marked a new lease of life for the Armada field, which had been earmarked for shutdown.
Pinsent Masons’ head of corporate finance, Rosalie Chadwick, who advised Ithaca Energy, added that Blackstone and Bluewater Energy’s investment of over £400million into Siccar Point Energy, Suncor Energy’s acquisition of a 30% stake in the Rosebank project and EnQuest’s £68million purchase of a stake BP’s Magnus field, demonstrate innovative deal structures which signify the recovery of North Sea investment.
She said: “Based on the recent flurry of deal activity the future looks very positive for UKCS and I believe the Shell-Chrysaor deal will prove to be the tipping point which leads to the third wave of the North Sea’s evolution and a number of other significant transactions in the months and years ahead
“More availability of funding, a stable oil price, better alignment of price expectations for both buyers and sellers, and a fresh approach to decommissioning responsibilities, means that all the chess pieces are lined up with the North Sea poised for a period of productive M&A activity.
“The identity of a lot of owners will change quite considerably, but it is no bad thing to see well-capitalised new blood enter the sector and embracing new technologies, which make smaller recoveries in the more mature fields economically viable.
“We have a relationship with Ithaca dating back a number of years and are delighted to be involved in this next major milestone for the business. It caps off a busy start to the year which has seen a renewed level of interest in North Sea assets as prices have stabilised and expectations adjusted.”
Ms Chadwick said there has been an opening up of the equity markets over the last six to 12 months with increased PE backing, not just in funding management teams but also in capital deployment. “This has been transformational after a four-year funding hiatus which left the North Sea perched on the edge of a chasm,” she said.