Uncertainties see oil deals drain away but Silverstone merger Bridges gap

DEAL activity in the oil and gas sector experienced a "significant drop" during the first quarter of the year, according to industry figures published yesterday.

News of the fall in the number of mergers and acquisitions came as data revealed that North Sea drilling levels dropped to their lowest ebb in six years during the first quarter. The fall in drilling was caused by a dearth of appraisal wells, according to accountancy firm Deloitte, which compiled the report.

A number of factors may have contributed to the decline in deals, the firm said, including the unpredictable oil price and uncertainty over the position the next UK government may take on North Sea taxes.

The firm reported that there were only three international deals in the first three months of 2010, compared with five in the first quarter of 2009. There were six domestic deals, however, compared with four in the first quarter of last year and only one in the final quarter of 2009.

Aberdeen-based Silverstone Energy joined in the M&A activity yesterday by announcing that it was merging with Norway's Bridge Energy.

The enlarged entity – also called Bridge Energy – has applied to list on the Norwegian stock exchange and is expected to float in the middle of next month.

Canada-based Storm Ventures International (SVI), which owned Silverstone, will control about 80 per cent of the shares following the merger, with the old Bridge shareholders holding a 20 per cent stake in the new Bridge.

A further 324 million Norwegian kroner (35.7m) has been raised from Lime Rock Partners and a number of institutional investors in Europe and North America.

Lime Rock had previously helped to found Silverstone in 2005, before having its stake bought by SVI in 2008.

Tom Reynolds, former managing director of Silverstone and the new commercial director of Bridge, told The Scotsman: "For most of the people working for the two companies, there will be little change in their day-to-day jobs. Silverstone has experience in production, whereas Bridge has more exploration expertise."

He said that Silverstone brought about ten people to the new company, while Bridge had employed about 20 staff.