North Sea Deal Activity Down During 3Q
Deal activity in the UK North Sea fell during the third quarter of 2014, according to new data from Deloitte's Petroleum Services Group.
The business consultancy's latest report into activity within the oil and gas industry in northwest Europe found that just four offshore UK deals had been announced during the quarter, compared to 14 during 3Q 2013 and five in 2Q 2014.
Deloitte said that the dip in activity could be due to operators holding off on making investment decisions until the future of the UK zone of the North Sea becomes more clear, particularly as the industry awaits more detail about the UK government's implementation of the Wood Review.
"All eyes will be on the Chancellor's Autumn Statement, where industry will be looking for measures which support the challenges of operating in this mature basin. Having spoken to a range of investors in the North Sea, we know that a fiscal regime which is more predictable, with a lower tax burden is key for improving investor confidence. Incentives which will encourage exploration and appraisal activity, as well as new entrants to the region, are also a vital part of the equation," Derek Henderson, a senior partner in Deloitte's Aberdeen office, commented in a statement.
"Ultimately, the UKCS needs to be internationally competitive if it is to attract the investment it requires to boost its future prospects. We’ve made all of these views clear in our submission to the fiscal consultation. This is the most important Autumn Statement for some time now, as it could be the last chance to get the fiscal regime right."
The report also found that 11 exploration and appraisal wells were drilled during 3Q 2014, up on the seven that were reported during the previous three months and consistent with 3Q 2013.
However, Deloitte said that price pressure and access to finance have remained issues on the UKCS. A large number of North Sea assets are on the market from some of the larger operators. Smaller companies, in some cases with limited budgets, tend to be the most likely buyers, creating a price differential in the market and potentially stalling deal activity.
Graham Sadler, managing director of Deloitte's PSG, said that although the number of new wells drilled was higher this quarter compared with the previous three months, the figures have been at a steady low for some time.
"While it's encouraging to see an increase in the number of new wells drilled this quarter, we are starting from a low base. Until we see the incentives required to encourage further exploration and appraisal activity, drilling could remain muted in the short to medium term."
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