Norwegian Private Equity Firms Target North Sea

Cash-rich Norwegian private equity firms are eyeing up potential North Sea acquisitions, encouraged by proven management teams and reasonable market prices, claims a leading energy expert.

Rosalie Chadwick, a partner in legal firm Pinsent Masons, believes the Scots-Nordic alliance will be strengthened in 2014, echoing a number of investments in recent months, but it won’t be one-way traffic.

“There is an increased confidence by Norwegian investors in U.K. oil and gas assets,” explained Chadwick. “The appeal of strong and proven management teams, who are successfully working what are often difficult assets, set against reasonable market prices, is a big pull for Norwegian private equity funds and investors.

“The similarities of both countries and shared experiences of exploring and developing the North Sea has created a strong platform for cross-border investment and I see that trend continuing over the next few years.”

Last September Stavanger-based private equity firm HitecVision committed $150 million to support new start U.K. exploration business Oyster Petroleum, when senior partner Harald Vabø said, “We believe the that UKCS is an attractive part of the North Sea that retains significant potential but lacks adequately funded exploration companies.”

HitecVision are also the $232 million backers of Norwegian and U.K. explorer Spike Exploration, which last year snapped up Bridge Energy in a $164 million deal and now has interests in 16 licenses in the Norwegian Continental Shelf and three U.K. licenses.

Another dynamic has been Statoil’s decision to divest part of their U.K. assets, with OMV of Austria acquiring West of Shetland and Norwegian licenses in a $2.65 billion deal, while strong interest in the Norwegian Continental Shelf was confirmed with the Norwegian Government announcing that in its latest round of exploration license awards 48 companies had been granted 65 production licenses.

Chadwick added, “The Norwegian Continental Shelf (NCS) is far less explored than equivalent assets in the U.K. sector of the North Sea and with assets only 50-100 miles further out from Aberdeen than our most far flung assets, in practical terms it’s not that difficult to service operations in Norwegian waters than in U.K. waters. “From a fiscal perspective, Norway is a very stable environment which is important for potential investors. Employment laws are similar and in some cases more favorable than the in the U.K. and the health and safety culture is on a par with the U.K. Taking all of these factors together, this makes investment in the NCS less of a risk and a relative trouble free environment for U.K. investors. “I think we will see a period of increased investment from Norwegian investors into the UKCS but in reverse U.K. and international funds will be looking to not only add to assets in U.K. waters, but to use their Aberdeen-base to expand existing Norwegian portfolios.”