North Sea M&A exceeds $8bn as confidence returns

Merger and acquisition (M&A) activity on the UK Continental Shelf (UKCS) has exceeded $8 billion this year “in a clear sign that confidence is gradually returning to the basin,” said trade body Oil & Gas UK’s newly launched Market Insight.

The new Insight – the most recent overview of the current business environment as well as operational trends and performance on the UKCS – says that the recent increase in M&A activity in the basin should help to attract new investment over the next couple of years.

There are also signs that a number of significant projects could secure approval in the new year, offering a more positive outlook for the industry in 2018.

Mike Tholen, Oil and Gas UK’s Upstream Policy 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 the basin.

“Now with Transferable Tax History (TTH) in play, we expect that 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 field life.

“Analysis shows that when an asset changes operatorship, average field life extension of nearly five years is achieved, and I am confident that trend will continue to shape the future of the UKCS.”

Although larger discoveries are still being made – with the basin’s technical exploration success topping 300 million barrels of oil equivalent for a second consecutive year – the Market Insight notes that challenges do still exist within drilling.

Oil and Gas UK said the low level of development drilling during 2017 is of particular concern, with just 63 wells drilled during the first three quarters of the year.

Tholen added: “Oil and Gas UK’s Wells Forum is working with the industry on a basin-wide performance improvement strategy which will help to make well construction a more efficient and cost-effective process.

“Success in our wells strategy will create a virtuous circle to help unlock more opportunities on the UKCS.”