Despite the global mergers and acquisitions market (M&A) heating up, the windfall tax has poured cold water on the UK’s participation, Rystad indicates.
The analytics firm says that the value of deals carried out this year amongst upstream companies has reached $65 billion since the start of the year.
The brunt of this cash has come from deals in North America, Rystad’s vice president for M&A upstream research, Atul Raina, explained at a webinar hosted by the analytics firm.
In the UK there has been a number of M&A deals announced and rumoured as well, the Aberdeen-based Neptune Energy recently agreed a deal to be sold to the Italian supermajor Eni, expected to close in Q1 2024.
A sale and purchase agreement was formally agreed between the two groups earlier this month, with Eni-owned Var Energi simultaneously signing a deal for Neptune’s Norwegian assets.
© Supplied by Neptune/EniHarbour Energy has also reportedly been in merger talks with the US-based Talos Energy.
This move would see the UK’s largest producer of oil and gas list on the New York Stock Exchange and provide more opportunities for operations overseas.
However, according to the analytic firm’s s vice president for M&A upstream research, the UK’s ever-controversial windfall tax, or energy profits levy, has been hampering businesses in the county in the space.
Mr Raina described the taxation policy that recently saw a price floor implementation as “painful.”
Outlining potential deals, the Rystad Energy researcher explained that $2 billion worth of assets were put on the market in 2022 and “are yet to be sold.”
Mr Raina added that it’s a “similar story for 2023.”
Despite the “backlog building up” in the UK, Rystad says it is yet to see firms pull out of the country entirely, although there has been a reduction in investments.
The M&A researcher told delegates: “What they’re focusing on is diversifying their operations into other regions and one of the regions that we believe will attract most of this interest is Southeast Asia.”
© Supplied by OEUKCompanies have cut investment in the UK with the trade body Offshore Energies UK releasing a document earlier this year that detailed that over 90% of North Sea producers have cut spending in the country.
OEUK outlined at the time that this fall in investment was a result of the windfall tax.
The indications from Rystad also fall in line with news of Harbour Energy looking to acquire Talos Energy.
Earlier this year, Harbour Energy said the windfall tax has “wiped out” its profits for 2022 and previously the company’s chief executive, Linda Cook, said that the legislation would risk “driving investment out of the UK altogether.”
Yesterday it was announced that Serica’s chairman Tony Craven Walker would be stepping away from the company.
Mr Walker said that since Serica’s 2022 AGM, there has been a “whirlwind of anti-oil and gas sentiment”, in his parting letter.
He argued that the “UK industry caught in the cross fire” between the Conservative and Labour parties.
The result of the two political parties opposing views has resulted in a “damaging and totally illogical impact” on the Scottish economy, he argued.
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