Smart thinking oil and gas professionals in the Organisation of the Petroleum Exporting Countries (OPEC) are continuing to pump their easy to reach hydrocarbons for their own long term gain. It is their prerogative in a competitive world marketplace.
This and the vast quantities of shale gas flooding the North American market have combined to shatter the certainty that existed in oil prices.
World renowned entrepreneur and founder of Microsoft Corporation, Bill Gates once said: “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
Times have largely been good on the UK Continental Shelf, with high oil prices and accessible hydrocarbons. However by the start of this century, as natural resources became harder to reach, there was a realisation that technology, recruitment and training had to improve to be internationally competitive.
Many companies have already addressed these issues. Technology has been developed to a stage where oil majors can embark on new key projects, some using favourable UK Government tax incentives. However, when the oil price falls by more than a third it is time for another rethink.
HM Treasury has said it is committed to maximising recovery. Government decision makers have now shown this in their actions. A recent Aberdeen Grampian Chamber of Commerce study showed that 62% of oil and gas firms believe that tax changes should be the UK Government’s number one priority.
UK based investment houses want oil and gas clients as part of their portfolios. They provide an international focus combined with an economic cycle which is not entirely dependent on the UK.
Solid, foundation building has taken place this year. Our recent work with private equity houses has demonstrated this trend. Important growth deals were completed for engineering services company RMEC and fabrication services firm R&M Engineering.
There were also significant transactions through the Business Growth Fund for subsea and downhole services provider Spex and oil and gas IT specialists Inoapps. Greater certainty in the financial and tax playing fields can only create greater momentum.
Looking forward to 2015, we are aware of several forthcoming deals in the £5 million to £25 million bracket, as well as a couple of significant deals which are likely to alter the dynamic of the UK industry. Next year could certainly beat this year’s quota of deals.
Astute market intelligence will mean great opportunities for companies and individuals in the know.
It is important to maintain the inventive spirit of the industry through both highs and lows. There must be continued investment in research, technology and people to drive the sector forward and create future projects and success.
Tom Faichnie has more than fifteen years of experience in the finance industry. He joined Campbell Dallas LLP in September 2010 as corporate finance partner in Aberdeen. Tom specialises in financing, advisory and transaction support services across the energy sector.
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