Shining light through North Sea gloom

30 October 2015, News Wires – There is a good deal of pessimism surrounding the UK North Sea industry today.

North Sea platforms

North Sea platforms

However, some companies are bucking the trend, saying they do see a future for the sector.

While funding for exploration, appraisal and development is hard to come by, some smaller companies, private equity groups and others believe there is business to be done, mainly by focusing on acquiring production assets.

Jersey Oil & Gas, for example, which has backed into the shell of loss making AIM-listed outfit Trapoil as a springboard into the North Sea, believes it has a sensible business model that could prosper at current low oil prices by doing just that.

And chemical group Ineos has bought the UK gas fields of Dea Group from Russian billionaire Mikhail Fridman’s investment fund LetterOne.

It also emerged this week that Ineos was closing in on assets belonging to privately-owned Fairfield Energy. Earlier this month, the investment division of Israeli gas firm Delek acquired a near-20% stake in North Sea-focused Ithaca Energy for $66 million.

Then there is Neptune Oil & Gas, with former Centrica boss Sam Laidlaw at the helm, with a $5 billion fund backed by private equity firms Carlyle Group and CVC Capital Partners.

Also scouting around is Aberdeen-based Siccar Point Energy, with about $500 million in start-up investment from several equity players.

Of course, it will take more than just a few deals to see confidence return across the board. But interest from these players provides hope that the future of the North Sea is not as bleak as many make out. They perhaps prove that investors still see value in North Sea-related businesses, despite its high operating costs and maturity. It is a sentiment that will only intensify if oil prices rebound more quickly than most anticipate.

Time will tell if the choices of the companies are right. However, many who made moves in previous downturns — take Dana Petroleum, Lasmo and Enterprise Oil as examples — did well.

If the new breed does get it right this time, there is every chance these first movers will make investors very happy indeed.



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