North Sea may favour private equity4 Jun 2020 08:56
https://www.energyvoice.com/oilandgas/north-sea/243551/torrid-times-in-the-north-sea-may-favour-private-equity/
Some interesting points made in this article.
“There’s a lot of focus on cash-flow planning, banking facilities, understanding capital programmes and managing discretionary spending. Cash becomes king very quickly.....RRE have stink loads of cash big tick
The prediction is that there’s going to be a round of consolidations on the UK Continental Shelf but that there may be more in the way of mergers than acquisitions. I think we’re going to see people being rather reluctant to use any liquidity they have for acquisitions, but if they could combine portfolios and achieve synergies in costs and cash flows, that might be a way forward. We’re trying to get onto the front foot at Siccar. We have built a very solid business but how do we grow again?”
Similarly, on public markets. In the past there was the belief that it was possible to build companies of scale and then take them public. Venture is an excellent example. “That no longer looks possible. Public markets seem to have lost all appetite for E&P.” Does that mean we’re in a position where there’s no longer any point in “IPO-ing” a successful E&P company, but that taking a listed company off the public market could yield tolerable returns? Or reversing onto the market via acquisition/merger? “This sort of thing is going to have to be considered,” Sword said. “If you can’t exit via public markets, are ‘strategics’ going to buy regional independent E&P companies? “I’m not sure that the big players are much interested in M&A in the North Sea anymore. So how do investors exit? “It may be a different model; maybe it has to be a company that generates cash flow and distributes it, that is yield or dividend vehicles.
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