Private equity funds have accelerated the acquisition of European oil and gas assets, with 16 deals worth a combined £12 billion announced in the 12-month period ended 31 July 2022, according to data from global law firm Mayer Brown.
- Bounce in large oil and gas private deals in Europe
- Mid and downstream deals on the increase globally
- PE fund buyers well positioned for energy transition plans
Private equity funds have accelerated the acquisition of European oil and gas assets, with 16 deals worth a combined £12 billion announced in the 12-month period ended 31 July 2022, according to data from global law firm Mayer Brown.
By comparison, in the previous 12-month period, PE funds acquired just £2 billion of European oil and gas assets comprising 12 deals. Mayer Brown’s data also highlights that there has been a marked increase in the number of mid and downstream deals around the world.
While PE funds that specialise in the upstream part of the oil and gas industry are also making more deals, funds focused on oilfield services and mid and downstream businesses have shown a larger increase in deal volume. Several major players, including Partners Group, Inflexion and H2 Equity Partners, have all acquired oil and gas companies or oil and gas services businesses in the last 12 months.
Bob Palmer, Partner at Mayer Brown believes that private equity funds are also benefitting from commitments made by oil and gas majors to transition away from fossil fuels, giving them the opportunity to acquire assets at attractive prices as energy multinationals reshape their portfolios in preparation for a net zero world. “Some of the upstream oil & gas assets that changed hands over the last two years were attractively priced,” said Palmer. “Funds know that many of the majors have committed to reducing the size of their fossil fuel portfolios over the coming years.”
Russia’s invasion of neighbouring Ukraine meanwhile, caused a sharp spike in the price of both crude oil and natural gas, providing PE funds with an early boost to returns from their recent oil and gas sector acquisitions.
The subsequent weaponisation of gas and oil supplies by the Putin regime has also raised concerns in the West over the security of supplies to fuel growing global energy demand in the short- to mid-term. Palmer believes that natural gas and LNG likely to remain vital pieces of the energy transition jigsaw in the nearer term, and an expected increase in mid and downstream activity to underpin increased security of supply policies could also provide additional investment opportunities. In addition, as the transition towards a low carbon world continues, he expects other areas of the energy sector to attract the attention of PE funds, with new technology and information businesses, and renewable and alternative energy providers likely to come into play.
Key Takeaway | The reshaping of oil and gas majors’ portfolios away from fossil fuels should offer interesting opportunities for PE funds
