Private equity groups including Carlyle and Blackstone are to deploy billions of dollars in a hunt for acquisitions across the oil and gas industry, with a collapse in oil prices expected to lead to a wave of asset sales.
Carlyle says investors have committed $2.5bn to its first international energy fund, the biggest first-time capital raising in the group's 28-year history, taking to more than $10bn the total available for investment in energy.
The group, one of the world's biggest alternative asset managers, is to target the North Sea, preparing to invest up to $1bn in offshore UK fields after Wednesday's Budget slashed taxes on industry profits and introduced a new investment allowance to encourage exploration.
Carlyle's fundraising compares to the $9bn in capital that Blackstone chairman Steve Schwarzman this week said his firm had available across buyout and credit funds to spend on energy investments. GSO, Blackstone's credit arm, is also raising a fund for investing in the debt of energy companies, which may reach more than $2.5bn in size.
The size of the funds suggests investors believe that sharply lower oil prices — now down more than 50 per cent to $54 a barrel from last summer's $115 peak — will lead to attractively priced assets coming on to the market.
Sixty per cent of Carlyle's fund is likely to be invested in producing fields, much of them offshore, with a substantial portion in the UK North Sea, said people familiar with the plans.
It is understood that the group is prepared to take operating stakes in fields, but will be looking for assets that have many years of production left, ruling out older, more mature fields where decommissioning liabilities loom large.
One example of a possible acquisition would be a stake in Total's Laggan Tormore deepwater project west of the Shetlands, which is due to come on stream later this year. The French oil major is sounding out buyers for a 20 per cent equity share.
However, while industry executives say the cut in the UK's so-called supplementary tax rate on producers, from 30 per cent to 20 per cent, will encourage interest in the region, there remain problems over access to infrastructure and how to share decommissioning liabilities that are preventing deals.
The volatility in the oil price, moreover, has for now put buyers and sellers further apart. Though bankers say there is no shortage of equity stakes potentially on the block, it could take several months of settled oil prices before companies agree on asset valuations.
One investment banker said there was little likelihood of merger and acquisition activity anytime soon. "The North Sea is uninvestable, a no-go area," he said. "Anybody who has a mature position is desperately trying to get out. But it is extremely difficult to get out."
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