North Sea Deal-Making in 2019 – An Era of Transition?
New levels of North Sea upstream deal activity in 2019 are providing many reasons to be positive and optimistic about the future of this basin and its supply chain. Following a period of uncertainty for the sector, no one... Read more
Blog22nd Oct 2019
New levels of North Sea upstream deal activity in 2019 are providing many reasons to be positive and optimistic about the future of this basin and its supply chain.
Following a period of uncertainty for the sector, no one can deny now that favourable market conditions are making upstream transaction opportunities increasingly attractive.
Much has been written and commented on about the reasons and factors for this ongoing positive trend. They include business and operational efficiency drives, continued investment in and adoption of new technology and innovation, oil price stability, the gradual North Sea exit and sell-off by majors, an internationally competitive UK fiscal regime, the role of the Oil & Gas Authority (‘OGA’) and improved availability of data, and experienced leadership workforce.
On review of the deals we are seeing range across the spectrum from larger corporates to rapidly growing, highly entrepreneurial ventures and new entrants.
At the higher end, there are inspiring examples of belief and confidence in the North Sea, such as Ithaca’s acquisition of Chevron UK, Rockrose acquiring Marathon Oil’s North Sea assets, Chrysaor’s ongoing growth through buying the UK ConocoPhillips business – and most recently Energean’s acquisition of Edison E&P, giving them a North Sea position and the Petrogas / NEO deal with Total. This trend of asset and people transition from larger companies into smaller ones is a key highlight in the North Sea and appears set to continue.
Further down the scale, there are similar levels of activity from businesses buying into development opportunities. Active players include relative newcomers Talon Petroleum and Corallian Energy, and we are also seeing larger companies such as CalEnergy Resources, INEOS, Equinor and Shell increasing their positions.
Behind this is a growing mass of potential deals and business plans, most of which have not reached maturity or the attention of the press yet. There are increasing levels of activity from aspiring management teams and individuals who have acquired assets or licences and who are working up plans to execute new North Sea strategies.
In addition to this, the recent confidence at operator level is filtering through into the energy services sector and supply chain where there has been a number of transactions completed either directly by specialist Oil & Gas Private Equity (‘PE’) houses and growth capital firms or their portfolio companies. This upturn in PE confidence suggesting that the current market conditions are favourable to make investments and comes hot on the heels of the sale of Aberdeen headquartered mechanical and electrical services group Enermech to US based Carlyle Group for £450m which completed in October 2018.
Notable examples of PE Oil & Gas transactions that closed in 2019 include:
- Norwegian drilling inspection, maintenance and repair services provider, WellConnection Group AS who are backed by EV Private Equity acquired Scottish based Independent Oilfield Services, a provider of storage, refurbishment and management of oilfield equipment and tubulars.
- ICR Integrity a group concerned in the provision of repair and maintenance services to the global energy industry and a portfolio company of Graphite Capital, acquired certain trade and assets of Sky Futures Partners, a drone inspection business from MMC Ventures.
- Aberdeen-based Coretrax, a wellbore clean-up and abandonment specialist merged with the US headquartered Mohawk Energy, who are concerned inexpandable tubular well solutions. The transaction is the first by Coretrax since it received investment from oil field service sector PE firm Buckthorn in December 2018.
- Another Buckthorn Partners portfolio company, the subsea solutions provider Ashtead Technology continued its acquisition plans by acquiring Aqua-Tech Solutions, a subsea equipment rental and cutting services specialist based in Louisiana, USA
- Pipeline Technique, the high-end pipeline welding and spoolbased services specialist was acquired by London based energy PE firm Blue Water Energy from Heerema Marine Contractors.
- SCF Partners backed Centurion Group, providers of infrastructure, rental and support services to the energy industries acquired Texan located frac valve technology company Totalfrac.
Indeed, it is not only PE firms that are proactive in their pursuit of strategic targets as there are positive signs that larger acquisitive trade players still remain keen to acquirer businesses that can expand and complement their existing services, technology offerings and/or geographical presence.
Global Energy, for example, who are concerned in the provision of production integrity and drilling marine services, were particularly active and made three acquisitions in three months. Offshore moduler and accommodation service provider Aiken Group and engineering consultancy business Apollo Offshore were both acquired in February. This was quickly followed in June by the acquisition of the assets of Glasgow based non-destructive testing specialists, Axiom NDT. Each of these acquisitions growing Global’s presence to different parts of it expanding service offering.
Other notable completed transactions include the sale of safety and calibration system experts Martek Marine to James Fisher plc which together with acquiring Murjan Al-Sharq Marine Contracting took the FTSE 250 listed Group’s spending to £18 million for 2019. In addition, Dutch based energy personnel specialists, Atlas Professionals complemented its North Sea presence in purchasing technical recruitment experts Brander.
As we can see, improved optimism coupled with favourable market conditions are generating sustained upward momentum for deal activity
Throughout the North Sea’s history, we have seen much of this before in the form of consolidation, entrepreneurial growth, new exploration and advances in technology. Crucially now, however we have seeing the development of a stronger and more sustainable pipeline of deals and activity.
At AAB, our specialist E&P & Oil Service teams offer recent hands-on experience, knowledge and tested methodologies in many aspects of North Sea Upstream transactions, transition support and management. Our advisory and outsourced solutions span payroll and benefits, full lifecycle accounting, tax and consulting services.
Both of Anderson Anderson & Brown LLP
To find out more about Alasdair, Callum and the rest of the E&P Team, click here.