Positive outlook for Oil & Gas deal activity

Contact Callum Gray

or reach out to a member of our Corporate Finance team.

2019 was an interesting year for deal-making as despite the political and economic challenges, there were a number of notable transactions closing across a range of sectors including energy, food & drink, technology and construction. Although deal volumes involving large corporates were reduced, I agree with a number of my peers that a number of transactions were put in a holding pattern towards the end of last year, and would anticipate discussions to reconvene now that there appears to be greater market stability in which to transact.

Reflecting on the transactions which were successfully completed, we remain encouraged to see the steady flow of E&P deals continue with values ranging in scale, size and strategic rationale with the ongoing entry of smaller and more agile players all looking to navigate and compete in an environment that requires greater financial discipline,  continued investment in innovation and dynamic strategic planning.

Statements of intent and long-term commitment to the UKCS appear to have been made by Chrysaor & Ithaca in the respective acquisitions of the ConocoPhillips’ UK Oil & Gas assets for $2.7bn and Chevron’s North Sea assets for c.$2bn. Other notable transactions which facilitated new entrants to the basin included Total agreeing to disposal a bundle of North Sea assets inherited as part of their purchase of Maersk to HitecVision & Petrogas for c. $635m as well as the acquisition of Endeavour Energy by Waldorf which completed in October.

Whilst there have been many articles written regarding a lack of capital to support transactions, all of the aforementioned deals are supported by foreign investors, suggesting that the greater market stability is an opportune time to invest. This is also evident in the entry of Longboat Energy to the Alternative Interment Market (AIM) late last year. Led by the former management team at Faroe Petroleum, Longboat successfully raised an initial £10m of funding to assess and diligence oil & gas assets in both UK and Norwegian waters with the hope of bringing a new dynamism to ageing assets.

Turning attentions to the oilfield services sector (OFS), which continues to grabble with a applying a leaner approach; one that will rely not only upon technological investment and production efficiencies arising in-house.

The need to drive down costs and improve efficiencies has led many service providers to look to strengthen their market offering through further consolidation. A key driver in this being the requirement for OFS companies to offer a competitive bundled service package.

This is reflected in deal activity, particularly with the portfolio companies backed by energy specialist private equity funds. Notable examples include the following:

  • SCF backed Centurion Group completed the acquisition of Peterhead-based valve repair and manufacturer Score Group plc for £120m. This was the third of three deals in 2019 having successfully completed the purchases of Osprey 3, a provider of oilfield filtration equipment based in Kintore and US valve company Totalfrac;
  • Buckthorn, having acquired a majority stake in 2018 of Coretrax, a wellbore clean up and abandonment services business, subsequently merged with US based Mohawk Energy and acquired Aberdeen headquartered Churchill Drilling Tools;
  • Ashtead Technology, also backed by Buckthorn as well as Arab Petroleum Investments Corporation (APICORP), have been particularly active in expanding their service lines through acquisition having completed the acquisition of Louisiana-based subsea equipment-rental and cutting services specialist, Aqua-Tech Solutions in April, increased its ownership in subsea rental business, Forum Subsea Rentals in August and expanded its decommissioning and production-integrity capabilities with the acquisition of Inverurie based Underwater Cutting Solutions in September.
  • Energy Ventures backed Motive Offshore, who specialises in the manufacture, rental and servicing of winches, umbilical deployment equipment and subsea equipment, continued their growth plans with the acquisition of Pumptech AS, a Norwegian based provider of pumping and hydraulic equipment rental and repair services.

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.

Turning to our own deal flow, 2019 has been very encouraging and we were delighted to announce the successful completion of 70 transactions during 2019.  This is the 6th consecutive year in which AAB have completed 50 or more deals with the total 2019 deal value for AAB transactions being >£500m.

We look forward to building on the positive momentum seen in the year so far and our own pipeline of work has a healthy mix of E&P transaction support together with M&A and fundraising transactions in the energy services sector.

If you have any queries please do not hesitate to get in contact with Callum Gray, Corporate Finance Partner, or your usual AAB contact.

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