19 Dec 2017

North Sea deals help recovery

North Sea deals help recovery

New figures from trade body Oil and Gas UK, have highlighted a four fold surge in deals which could help drive a recovery in the industry.

The trade body highlighted an increase in deals this year to the value of $8 billion (£6 billion) which could signal a return of confidence to the sector following a difficult period triggered by the plunge in crude prices.

Significant change

The uplift in the number of deals, involving established giants such as Total as well as private equity investors buying North Sea assets reflects a significant change in the sentiment in the area.  Since the fall in prices in 2014 investment has reduced substantially, with thousands of jobs lost.

Despite the positive indications, total spending in the North is anticipated to fall next year, and the industry is still expected face challenges, with exploration activity at record lows leaving billions of barrels of potential production at risk.

The wave of deal activity could lead to an increase in spending on the assets involved, with new owners hopefully looking to extend the lives of fields and subsequently increase production.

In addition, the tax changes introduced in the recent Budget should result in an increase in the appeal of North Sea fields, with Oil and Gas UK suggesting that 2017 could see the beginning of a sustained increase in deal activity.

"Confidence is returning"

Mike Tholen, Oil and Gas UK director said: “This year has been a very busy one for M&A activity which must be seen as a sign that confidence is returning.

We expect M&A activity will continue into 2018 as established players can more easily divest their non-core assets to companies better suited to invest in them and extend their field life.”

Oil and Gas UK also noted further indications that the outlook for the North Sea is improving, pointing to several significant projects which could secure approval in the new year.

Bob Fraser, senior partner at Aberdein Considine said: “This is extremely welcome news for the sector and hopefully it will have a positive knock on effect for the local economy.

The housing market in particular has suffered over the last few years but we’re already beginning to see a gradual recovery.  The signs are looking more positive for the oil and gas industry than they have for some time and we look forward to seeing further investment in the sector and the region.”

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