Private equity goes bargain-hunting in Norwegian oil sector

* Investors see value in Norwegian oil fields

* Many assets available thanks to tumbling oil prices

* Buyers stand to benefit if oil prices rebound

By Stine Jacobsen and Gwladys Fouche

STAVANGER/OSLO, Norway, Nov 26 (Reuters) - Private equityinvestors are buying up assets in Norway's crisis-hit oilsector, betting on a recovery in crude prices and cutting dealswith energy firms whose focus is elsewhere and are happy togenerate some cash.

Russian billionaire Mikhail Fridman and Sam Laidlaw, formerchief executive of British utility Centrica, are amongthose taking or seeking stakes in existing fields in the seasoff the coast of Norway.

Their interest is a boon for oil firms slipping into the redafter years of large profits as the slump in oil prices shows no immediate sign of ending.

"For the market that means that you bring in additionalcapital, which is good in today's environment," said MartinBorthne, head of operations and projects for Total Norway.French parent company Total last month sold a stake ina Norwegian field.

Oil firms have cut spending, axed thousands of jobs andscrapped projects as they look to protect dividend payments toshareholders.

The price of Brent crude has fallen by around 60percent since June 2014 and some energy companies see scope totrim assets.

"When the oil price drops everyone try to assess whether thefall is temporary and the sellers remain cautious. When the oilprice has fallen and stabilised ... we see more transactions,"said Erik Holm Reiso, a partner at Oslo-based oil consultancyRystad Energy.

Private equity investors are prepared to take on the risk ofinvesting at this point, with a view to getting their rewards ifoil prices do recover over the next few years.

"It's quite natural that they enter in a low-priceenvironment and are willing to take the risk on increased oilprice going forward," Karl Johnny Hersvik, head of the Detnorske oil firm, told Reuters.

The International Energy Agency says oil prices could returnto a range around $80 by 2020, but oil prices are hard topredict and estimates vary widely.

BUYERS AND SELLERS

Fridman's LetterOne bought the Norwegian oil assets ofGermany's E.ON for $1.6 billion last month. Total sold a 15-percent stake in its Gina Krog oilfield for 1.4billion crowns ($162 million) to a unit of private equity-backedSequa Petroleum in October.

In the case of Total, "the deal demonstrates (its) desperateneed for reducing capex and protecting its dividend," saidSwedbank analyst Teodor Sveen-Nilsen in a note to clients. "Theadjusted deal value ... (was) sensationally low."

For the buyers, Norway currently offers better explorationopportunities than its North Sea sister, Britain.

Some of these private equity-backed companies are focused onmaking oil and gas discoveries to sell on, or more broadlybuilding up a business on which they can later cash in.

"In the UK, more has been drilled, so it is more difficultto find good and big enough prospects that could be profitableto drill. In Norway there is also more acreage," said Reiso atRystad Energy.

Some of the sellers are firms such as utilities whose corebusiness is not oil exploration. Others are oil companies whichare focusing their exploration efforts in places including theGulf of Mexico or the Gulf of Guinea, where the chances ofhitting billion-barrel discoveries is deemed higher than inNorway.

INVESTORS PREPARE

More private equity funds are preparing to step into thebreach.

Energy-focused investment firm Riverstone Holdings andGlobal Natural Resource Investments, formerly Barclays Bank's energy private equity investment arm, have put in $200million each to set up Origo Exploration, focused on exploringfor oil. It has the financial backing of Temasek, Singapore'ssovereign wealth fund.

And Laidlaw, who has $5 billion to play with via his NeptuneOil and Gas private equity vehicle, has said he is eyeing theNorth Sea for acquisitions. He has the support of leadinginvestors Carlyle Group and CVC Partners.

Smaller Norwegian investors are also getting involved.

HitecVision, which has made big profits developing oilcompanies and then selling them to international oil firms, isbranching out by buying large stakes in listed energy industrysupply businesses.

OKEA, with 1.1 billion crowns in capital, was set up in Mayby the country's former oil minister and a former head of Detnorske oil firm, to develop fields that moreestablished companies deem uneconomical.

"We have bought a lot of fishing equipment, but we have notyet caught any fish. During 2016, we must have a concreteproject," OKEA partner Erik Haugane, himself previously at Detnorske, told Reuters. ($1 = 8.6128 Norwegian crowns)

(Editing by David Goodman and Keith Weir)