PESGB October 2017
- REVIEW: African E&P Conference
- REVIEW: Petroleum systems of North Africa & the Mediterranean Course
- ARTICLE: Supporting the Next Generation of Geology Teachers
- NEWS FEATURE: New Bid Rounds in Poland – Inventory of reservoirs in areas offered to revitalise exploration
- NEWS FEATURE: Southeast Asia – Resiliency of LNG production amid overall decline
Plus much more inside
North Sea M&A is back
After a quiet few years Mergers and Acquisition activity is back in the North Sea. Previous industry downturns have been followed by aggressive acquisition activity with acquirers targeting cash strapped vendors. We have not really seen much M&A activity since the beginning of this recent downturn, however liquidity has now returned to the M&A market this year with a bang.
In the last 9 months there have been a whole suite of high profile North Sea upstream acquisitions, capped most recently by Totals announced acquisition of Maersk Oil for US$7.5 billion. Whilst Total is acquiring A.P. Moller-Maersk’s entire global portfolio of assets, around two thirds of these assets reside in the North Sea on a remaining reserves basis. The deal will see Total become the second biggest producer in Europe and clearly confirms that they continue to hold North Sea acreage and assets in high regard.
That being said, the Majors continue to be net divesters of assets in the North Sea, driven by the need to rationalise and consolidate their global portfolios as a response to market conditions. In the recent past, independents like Apache, AkerBP and Lundin have moved into the space vacated by these Majors. However this year private equity backed vehicles have emerged as a dominant force in M&A. Around US$9 billion of North Sea divestments have been lapped up by private equity this year, mostly focused on the UK and Norway. This has led to a rapid evolution in the North Sea corporate landscape. Bluewater backed Siccar Point has made two UK acquisitions – the Mariner hub from JX Nippon and the entire UK portfolio of OMV. Early this year saw an even bigger deal where EIG backed Chrysaor purchased a US$3 billion package from Shell and Carlyle Group’s Neptune announced the acquisition of Engie. Additionally HitecVision backed Point Resources grew its portfolio in Norway with the acquisition of Exxon’s operated assets.
There are a number of reasons behind the recent upturn in M&A activity. The valuation gap between buyers and sellers has now started to close which has enabled deals to happen. Interestingly companies have been willing to put more flexible deal structures in place, mitigating downside risk for buyers and creating upside for sellers, with creative solutions being found to address issues relating to decommissioning liability and oil price for example.
What does this mean for exploration? It’s no doubt a positive in my mind. These deals put assets, and their exploration upside, into the hands of companies that are willing to invest. More wells will be drilled as a result of these transactions as their new owners seek growth and material returns from their acquired positions. Many analysts expect further upstream M&A activity over the remainder of the year and into 2018.
Now onto PESGB matters. With upcoming elections for the 2018 Executive Council, this is your chance to nominate, or be nominated, to join my successor Neil Frewin and his team next year. It’s an exciting time for the PESGB. We have had a tough couple of years financially, but we have come out of this challenging patch more efficient, stronger and with an even better membership offering. There are a total of five Council roles up for election this year – President Elect, Aberdeen Elect, Outreach Director, Education & Training Director and Young Professional Director. From my personal perspective it has been a hugely enjoyable and rewarding experience serving on Council so far, and I could not recommend it more. With strong support from Maria and her excellent PESGB Office team, this represents an opportunity for you, or your nominee, to have a very real impact on the Society, the industry and the wider public.