North Sea Oil & Gas: The Outlook for Deal Making

The ongoing recovery in the oil price and increasing pricing certainty continues to improve the North Sea Oil & Gas M&A landscape with activity led by the upstream E&P corporate and asset transactions. There are many notable examples, with Total’s…

Blog19th Nov 2018

By Callum Gray

The ongoing recovery in the oil price and increasing pricing certainty continues to improve the North Sea Oil & Gas M&A landscape with activity led by the upstream E&P corporate and asset transactions. There are many notable examples, with Total’s acquisition of Maersk Oil being finalised this year and BP’s exchange of North Sea and Alaskan assets with ConocoPhillips and this appears to continue with the recent announcements from Total and Chevron to divest assets in the North Sea. Whilst both vendors have differing rationale behind their decisions to sell, there is no doubt that these proposed disposals could provide opportunities for international private equity firms who continue to build upon their recent market entries and expand their portfolios. 

If M&A activity in the North Sea is to increase, it is key that innovative solutions continue to be found to overcome potential future issues such as budget commitments and decommissioning liabilities. Decommissioning is inevitable, and when the timing is right and market conditions allow, this will undoubtedly become a major sector. For now however, active acquirers, particularly in the supply chain, continue to focus on expanding their existing service and product offerings through acquiring technology enables to protect and increase market share. 

Whilst the market is relatively stable, we still find ourselves in a state of residual disruption, disjointedness and uncertainty as to what the future holds.  Because of this, it is challenging to pin-point or accurately predict what sectors will succeed in the basin.

We will always be beholden to the price of oil, which with many geopolitical factors, we have no control over whatsoever. There are still huge opportunities in the North Sea however, and with a little market stability, we are learning to make the most of what we have.  We are doing this especially through two significant areas that are building in momentum and moving us on from a disjointed market.  These are the application of new technology and investment through new deal activity.  

In all sectors of the industry, innovation and the use of new technology is driving the future and the ways we work.  However, innovation and new technology requires investment and investment requires market confidence and with some decent levels of certainty, 2018 feels like we are achieving this, and there is a healthy mixture of E&P deal making investment, as well as increasing levels in the service sector and decommissioning.  Surely in a diverse North Sea basin, driven my innovation, technology and investment, there is a place for all of these sectors for many years to come, not just one?

For more information please contact Callum Gray (callum.gray@aab.uk) or your usual AAB contact.

To find out more about the Corporate Finance team, click here.

 

 

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