This article was written by Claire Munro from Brodies.
The stabilising oil price has triggered significant oil & gas M&A activity over the past year. Much of this is centred around getting the right assets into the right hands, in moves that will lead to renewed investment into the UKCS, allowing the region to continue to take advantage of existing fields and to bring new field developments on stream.
As operators and service companies have had to adapt to a lower oil price, so too deal-makers have had to become more innovative, delivering unique and often ground-breaking structures, as demonstrated by the Tolmount development.
The key to unlocking this deal was Premier securing a commercial structure which was the first of its kind, minimising Premier’s capital expenditure while maintaining its exposure to the upside in the Greater Tolmount Area.
The Tolmount deal is interesting in many ways – it demonstrates the key themes of private equity investment and extends the role of an infrastructure owner closer to the wellhead than any previous project – involving them right at the beginning of project development, rather than as a purchaser of developed infrastructure. This model could prove very attractive to other UKCS licensees considering alternative ways to sanction CAPEX projects, and other UKCS Infrastructure providers looking for new areas to expand into.
Another innovative deal, which completed in the fourth quarter of 2018, was the purchase of Magnus and related infrastructure interests by Enquest from BP. This deal was structured in two tranches – an initial interest of 25% which transferred (together with operatorship of the various assets) in 2017, with an option for Enquest to acquire the remaining 75%. The deal also included bespoke financing and decommissioning elements.
In January 2019, Chevron transferred its interest and operatorship in the Rosebank field to Equinor – an important deal because of the field’s current stage in its life-cycle. In addition, both Chevron and ConocoPhillips have announced significant marketing exercises in relation to their UKCS assets.
And reflecting activity across the industry, Rovop's asset acquisition of the M2 ROV fleet is another example of innovative acquisition structures in the oilfield equipment and services sector.
The significant number of recent deals and developments, as well as new, innovative ways of doing those deals and developments combined with the arrival of the Transferable Tax History all point to continuing activity in the UKCS deals sector and a positive outlook for the foreseeable future.