The Press and Journal (Aberdeen and Aberdeenshire)
Oil majors now looking for bigger ‘bang for their buck’
North Sea: Sector ‘suffering’ as energy giants plan to sell off assets as returns diminish
The North Sea is “suffering” due to firms looking to more attractive regions of the world to invest, according to an analyst.
Stephen Martin is a senior investment manager at Brewin Dolphin. His comments come following a series of announcements from oil majors that they are planning to sell off assets in the North Sea.
“They are looking to be more concentrated and focused”
Earlier this month Total announced plans to sell off assets worth more than £1 billion.
In May it was reported ConocoPhillips is considering an exit from the North Sea after the firm previously announced plans to cut 450 UK jobs.
Meanwhile Chevron has revealed it plans to sell off all of its central North Sea assets.
Mr Martin believes the large firms are looking to stay in good shape, and the North Sea has been a victim of that with firms looking at potentially more attractive areas like Brazil, West Africa and the Gulf of Mexico.
He said: “I think the North Sea is suffering from that focus on other parts of the world where there are better growth prospects.
“A lot of the reasons why they are doing it are to repair their own balance sheets. They are looking to be more concentrated and focused to repair some of the damage that the low oil price has done.
“It is a diminishing resource, as everyone knows, and we’ve also got decommissioning to come. I think the main reason is they want to make sure their business is in good shape.”
The analyst believes the move could make way for other firms to take up the assets, with Chrysaor, Spirit Energy and Neptune being among the examples.
He described this as the “natural evolution” of the sector, ahead of “new opportunities” such as decommissioning.
He added: “It’s a natural evolution of the structure of the industry. You’re going to have smaller firms who are a bit more focused and effective, and larger companies are going to be looking for more bang for their buck.
“I would expect the trend to continue. The point of interest about some of the majors putting these assets up for sale is it is just a natural evolution but don’t forget that with that comes opportunity.
“That’s for the whole Aberdeen area, with decommissioning on the way, with a huge amount of knowledge and expertise.”
Despite firms offloading North Sea assets, Mr Martin said west of Shetland remains a largely attractive area.
Although Total is selling assets, it is keeping some of its equity in the Laggan-Tormore fields. And ConocoPhillips is retaining a 7.5% stake in BP’s Clair field after selling off 16.5% to the firm.