A new London-based fund is looking for oil and gas assets to buy. Carlyle Group and CVC Capital Partners back this $5 billion fund. But are there too many risks involved with the troubled industry?
A new private equity backed fund is set to buy oil and gas assets around the world. The London-based fun, Neptune Oil and Gas, is headed by the former boss of Centrica and it has the backing of two private equity firms, Carlyle Group and CVC Capital Partners. The $5 billion fund shows private equity still believes in the growth opportunities in this troubled industry.
The Fund’s Aim
The London-based platform is hoping to invest in a number of large-scale oil and gas fields, as well as companies. It is aiming to find these opportunities in the North Sea, as well as North Africa and Southeast Asia.
The fund is headed by Sam Laidlaw, who last year stepped down as the boss of the British energy company Centrica. Laidlaw explained the fund’s mission in the Financial Times saying, “This is not just a punt on the oil price. This is actually about trying to improve operating efficiency, add barrels, add reserves and find different operating models that drive value”.
According to Reuters, Neptune Oil and Gas is hoping to strike one or two deals totalling around $5 billion within the next two years. It is hoping the deals will lead to the creation of a new exploration and production company (E&P).
The E&P company is hoped to start producing around 75,000 to 100,000 barrels of oil a day.
Opportunities in the Troubled Industry
The oil and gas industry has been going through a tough time in recent years. Oil prices have dropped sharply and the industry is struggling to get back on its feet.
The troubles have provided plenty of buyout opportunities for private equity funds. Big industry players, like Royal Dutch Shell and Total, have put up oil and gas assets on sale, but there are plenty of smaller exploration companies looking to sell as well.
Laidlaw told Reuters on Tuesday, “The timing is good, a lot of the super majors are going through portfolio restructuring and national oil companies might be pulling back because of the lower oil price.”
Private Equity Interest Increases
There has been a clear increase in private equity interest in the sector in recent months. A number of private equity companies have been especially keen to join forces with industry executives such as Laidlaw.
Wood Mackenzie, the energy consultancy, told the Financial Times private equity funds have currently around $40 billion worth of funds to invest in exploration and production deals.
Carlyle International Energy Partners has been especially active in the sector. Earlier this year it announced the closing of its $2.5 billion fund, which means the firm has a total of $10 billion equity to invest.
Although the industry could potentially provide lucrative returns for private equity firms, not all partnerships have been successful. Most recently, private equity fund-backed Fairfield decommissioned its North Sea Dunlin Alpha platform as a non-profitable investment venture.
The oil and gas sector is set to attract much more private equity investment this year. It’ll be a while before the investments reveal themselves either as a hit or a miss.