For the second week in a row, North Sea assets have featured heavily in the upstream M&A sector. Back in March 2011, when the UK budget announced an increase in the supplemental tax to 32%, there was widespread condemnation and threats of withdrawal from some senior companies within the industry. The UK Government however called the companies' bluff, sticking to its tax proposal and now 6 months later, the region is again attracting major investments. This week, the deal in question is ENI’s $844 million acquisition of GDF SUEZ’s 10.4% interest in the Elgin and Franklin fields, which has followed on from Apache Corp’s $1.75 billion acquisition of certain North Sea fields from ExxonMobil last week.
The acquisition metrics of these recent deals are not reflective of a region being strongly prohibited by tax constraints either. ENI paying just under $60,000, and Apache paying $45,000 per flowing boe indicates that big profits are still achievable due to the region’s strong infrastructure, support services and local market. In addition to the ENI deal, Bridge Energy also entered into a North Sea deal this week, which although at $38 million is dwarfed by ENI’s transaction, does represents a major deal for Bridge, a company with a market capitalisation of just $80 million. On an unadjusted basis, the deal looks reasonable at a cost per flowing boe of $48,000. Factor in however that the deal includes oil stock in tank worth an estimated $20 million, production is weighted strongly towards oil and that Bridge Energy will be able to use its accumulated tax losses to offset a portion of future taxes and the deal tips far more in favour of Bridge Energy. The market responded in kind to the news as the share price of Bridge Energy jumped close to 10% on the announcement of the deal.
GAIL Ltd became the latest government-backed Asian company to join the US shale sector this week when it committed $95 million to acquire a 20% interest in 20,200 acres in the Eagle Ford play. After negating the assumed value of the production included with the asset, the cost per undeveloped acre equates to $17,000, representing the high liquids content of the Eagle Ford and also the inflated price that the Asian NOC’s seem willing to pay to enter into US shale agreements. Following this deal, Carrizo Oil & Gas entered into an acquisition in partnership with…
