Intelligence brief: Most US energy CEOs expect M&A in next two years; North Sea gets another P&A venture
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Most energy CEOs expect M&A in next two years
Ninety-two percent of senior energy executives in the United States expect to be involved in a merger or acquisition in the next two years, KPMG Global Energy Institute has reported.
The firm polled more than 150 people for its annual Energy Industry Outlook Survey, with 38% responding that the most strategic approach to M&A would be acquiring assets rather than an entire company. Among oil and gas executives specifically, 51% said restructuring and bankruptcy opportunities will be the primary driver of acquisition activity.
Some 94% of respondents said continued volatility in commodity pricing coupled with the regulatory environment make it likely that they will undertake significant changes to their business models over the next three to five years. Many have already put such thoughts into action, with 67% saying they have completed or are launching a business-transformation initiative.
The executives expect the Brent Crude oil price to stabilize at a level slightly lower than the current $50-per-barrel in about a year’s time, with 65% forecasting a price of $40-49/bbl in spring 2017 and a further 22% seeing a price of $30-39/barrel. Almost three-quarters (73%) of respondents said the headcount in the US oil and gas industry will stay the same or decrease over the next two years.
Veterans form North Sea P&A venture
Three veterans of the oil and gas industry have joined forces to form a new company focused on the plugging and abandonment of North Sea wells.
At least 4,300 wells are in line for decommissioning, of which 30% will need to be plugged and abandoned in the next 10 years, Aberdeen-based Well Decom has pointed out, using data gathered from Oil & Gas UK’s annual Decommissioning Insight.
Stephen Jewell, formerly managing director of oil and gas consultancy Selgovia and director of Xodus Group’s wells and subsurface division, has been joined by Graeme Johnston and Peter Greaves in forming Well Decom. All three men have more than 30 years’ experience working in the industry.
More than half of the money spent on decommissioning will be spent on wells, Jewell was quoted as saying by news sites following announcement of his new venture. Pointing out that plugging and abandonment is the costliest part of the total project and carries particular risks and uncertainties, he said: “When a well is plugged and abandoned it needs to be sealed, forever”.
Well Decom has arrived in Aberdeen on the heels of another P&A specialist – Ardyne, which was established earlier this year with £50 million ($72 million) investment from Lime Rock Partners. Industry consultants told DecomWorld last month that the success of that venture depends on whether operators can be persuaded that there are cost benefits to conducting P&A sooner rather than later.