I am not so sure that companies in the UK continental shelf are biding time but the market has stalled for a number of reasons.
Many operators are re-evaluating their assets, which in turn is stalling investment as they decide which ones they want to focus on.
Decisions are also being hampered by rising costs and uncertainty about the future oil and gas price outlook.
A number of firms are doing this review at the same time, meaning there are a high number of assets in the market for sale.
The issue is, however, there are fewer buyers. Those companies that could finance acquisitions from their own balance sheets are currently selling.
Those looking to buy are reliant upon third-party finance, which is harder to come by due cost increases and price uncertainty.
Added to this is the possible impact of the fiscal regime changes and new regulator, the Oil and Gas Authority (OGA).
It all creates uncertainty, which impacts on the cost of and availability of capital.
What’s the cure? Time – in due course we will get more colour on the fiscal and OGA actions.
Similarly, we need to see how reduced or stalled investment impacts on cost – potentially lowering it, while at the same time there may be more comfort over the sustainability of commodity prices.
Right now buyers are left with a number of unknowns. These are not stimulants for investment, so a stalling of deal activity will continue.
Andrew Reid is group chief executive of energy consultancy Douglas-Westwood
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