NOVEMBER 2016 PRESIDENT'S PAGE
Choosing the right partners is key
As I come towards the end of my year as President I would like to thank all the PESGB office staff and the PESGB Council for their support and advice throughout the year. It has been a very challenging year for the industry and the Society, but an extremely rewarding year for me personally, which has confirmed what a great organisation the PESGB is. I have had the chance to work with some great people and meet many new and old acquaintances.
The oil and gas industry is a joint venture business and a key part of our role is working with people from other companies as well as regulators, trade associations and ministries. The last two years have been particularly difficult in getting alignment in many joint ventures, with too much focus on legal agreements and contracts rather than relationships. This has resulted in a lot of tension between joint venture partners which has fed through to the supply chain with the focus on halting or deferring activity or renegotiating contracts. It has brought into sharp focus that choosing the right partners is one of the most important things we do! Inevitably things often change on this front with companies being taken over and the new owners having a different set of priorities from the old. Rarely does a takeover result in closer alignment in joint ventures although it can provide more security regarding financing.
This downturn has been notable for the lack of takeovers of financially distressed oil and gas companies. Certainly in the North Sea this has been due to many distressed companies being cashflow or NPV negative or both at current oil and gas prices. Even the most optimistic will find it tough to justify purchasing a company with negative cashflow or value, where the most significant change will be driven by oil and gas prices. The result is a that a whole raft of companies have gone bust with their licence interests being acquired by the other joint venture participants where necessary or the licences have been relinquished as the entire joint venture has decided to abandon joint operations. In some cases parts of the portfolio of the failed company have found a buyer, but full corporate acquisitions have been pretty rare. The administrators have been keen to ensure that any potential buyer takes some of the baggage within the portfolio along with anything that actually has value and ideally positive cashflow.
Most of the corporate reorganisations have been completed or are well advanced. Certainly in the UK there have been few additions to the casualty list over the last few months and the worst seems to be over. I therefore look forward to filing away the contracts and agreements and once more focussing on relationships. It will be a delight to get back to some positive activity like drilling a well or developing a field rather than trawling over another joint operating agreement to check if everyone is playing by the rules and issuing formal notices. Hopefully this downturn will lead to a more collaborative approach to unlocking the significant remaining potential that undoubtedly exists in the North Sea.
Most UK industries have a universally recognised professional qualification, such as Chartership, which is required before that person achieving it can perform specific tasks. Whilst we are familiar with chartered engineers and accountants there is no requirement for a professional qualification in the oil industry, despite the fact that we work on safety critical tasks. A work group of senior professionals, the UKOGC, is now working to redress this imbalance, for the operational geoscience (operations and wellsite geologists, mudlogging and PPFG) disciplines. They have the broad support of the Geological Society and HSE and are working to spread the message through the industry to try to deliver a working system. The PESGB support this initiative. If you are interested in finding out more please contact one of the working group (Pat Spicer, Christine Telford, David Harrison, Bob Fagg, Tim Herrett, Martin Gardner and Richard Smout) or go to the group’s LinkedIn page “UK Operational Geoscience Competency Initiative” or www.UKOGC.com
This month sees PETEX being held at ExCeL from the 15th to the 17th November. This will be an event not to be missed for those with reasonable access to ExCeL, London. If you are attending, I look forward to seeing you there.