Comment: Good time to snap up bargains in the North Sea

Published on 17/06/2012 00:00

THE price of oil is falling. Good news for motorists but normally not so promising for the industry, particularly the explorers who require the benefits of a high margin. Lower prices also increase the level of risk for investors.

So, perhaps it is all the more surprising that they’re still backing projects around the world, not least in the North Sea.

Amid a general dearth of mergers and acquisitions activity, oil and gas is one of the few sectors still pumping out transactions.

Today we report that Aberdeen firm Eland is keen on a flotation that will help it raise funds for exploration off the west coast of Africa, a region that is high up on oil and gas firms’ list of priorities. Shell has extended its offer for Cove, another Africa-focused group.

But closer to home, the North Sea is also proving a happy hunting ground. Parkmead, run by former Dana Petroleum boss Tom Cross, is mopping up assets and is acquiring fellow Aberdeen firm Deo Petroleum whose main interest is a stake in the Perth field.

Edinburgh-based Cairn Energy last week unveiled a £414 million agreed bid for North Sea focused Nautical Petroleum, just weeks after it paid £289m for Agora, another company active in the region.

Cairn, whose main activity to date has been in India, regards this twin move on the North Sea as a rebalancing of its portfolio; but it is more than that, given the $1 billion it has gambled drilling off the coast of Greenland with no success. Buying into the certainty of the Catcher Field therefore looks like a dead cert.

Commentators have frequently warned that the North Sea’s prospects are waning but until the wells dry up it will be regarded as a cash cow, particularly for the smaller and mid-sized firms and their armies of advisers.

EnQuest, Faroe, Trap Oil and Xcite are among others fronting this latest phase of development in the region. Cash-rich companies and those with an eye on consolidation are viewing the current depression in equity prices as a good time to snap up a few bargains.

Games can light up Aggreko

TEMPORARY power provider Aggreko suffered a rare slippage in its share price on Friday. But there is no cause to don the tin hat just yet.

It has been a sure-fire winner for investors over most timescales, a rise that has consolidated its position in the FTSE 100.

Friday’s 94p, or 4 per cent, fall pushed Aggreko to the foot of the index, but this was a reaction to its failure to conform to normal expectations of an upgrade rather than any serious alarm over faltering prospects.

Revenue and profits growth has softened, but ignore the scary headlines and expect the London Olympic Games contract to help restore Aggreko’s winning run.

Is football deal an own goal?

THE boldest move of the week was surely BT’s entry into the football television rights market. Analysts have been assessing the merits of the £3 billion joint deal with BSkyB for English Premier League matches over three seasons from 2013-14.

The general view was that the pair had overpaid, especially after pushing the price up by 70 per cent. Shares in both companies fell.

Questions particularly surround BT, which has long-harboured ambitions in television. The deal provides content for BT Vision, but it has to prove it will have strategic benefits.

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