OTC 2013: Houston remains industry’s must-attend event

Nick Dalgarno.
Nick Dalgarno.
Opinion by Energy Voice

Nick Dalgarno is a managing director at specialist corporate-finance adviser Simmons & Co International

The international oil and gas industry will have a frenetic week of activity at OTC.

There is a healthy degree of optimism across the industry, but the picture differs between the domestic US market and the international sector.

In the US, the decline in shale activity last year has continued into 2013 and the market is expected to decline. In contrast, companies leveraged to the international markets are seeing good growth this year.

OTC is of course about much more than the US market.

It is the forum that draws the decision makers from across all the key oil and gas provinces around the world.

The sheer volume of meetings, whether planned or by chance, that happen when the who’s who of the industry is in town is arguably the most significant element of OTC.

From a mergers and acquisition perspective, this is what feeds through into deal activity in the subsequent months.

With this in mind, teams from all of our global offices each have their own meeting plans in place.

The key objective is to see companies, senior management teams and to build and develop relationships as well as the knowledge and understanding of business plans and strategy which from a Simmons perspective is fundamental to successful mergers and acquisitions (M&A) activity.

Through this intelligence gathering, we are able to add value to our clients’ deals, whether they are a small firm or a multinational.

Despite 2012 being a year of continuing challenges for most of the world’s major oil-consuming economies, the global demand for oil remained high.

This, coupled with a declining established production base, is driving exploration activity in ever-more-challenging environments.

We can therefore expect international markets to be even more favourable for oil and gas this year and the picture for the UK continental shelf is equally positive with investment levels offshore reaching levels not seen in recent decades. While the macro-economic underlying concerns remain, 2013 is shaping up to be a good year for the energy industry.

This is reflected in the fact that there is greater certainty in the industry at present than there has been in recent years.

Service companies have contracts in place to 2015, while the major capital equipment providers also have full order books to 2015.

From an M&A perspective, interest in deals is strong from trade buyers and private equity.

We expect that the large, predominantly US, service companies will seek to add capacity, technology, intellectual property geographic reach and people through acquisition. The Middle and Far East are also very active just now. In private equity the interest is from both sector specialists and more general funds which recognise the unique opportunities the sector offers in this current market.

Within this context, OTC remains the must-attend event for the industry. US oilfield service companies are still the biggest players and Houston remains the leading decision-making centre for the global industry due to the concentration of multinationals headquartered in the city.