Addressing Overhanging Funding Uncertainties through Strategic M&A

The World Independent & Junior Oil and Gas Congress, 15th – 17th of November 2010, Jumeirah Carlton Tower, London

M&A activity is set to accelerate further in 2010/2011, although a return to the rapid pace of deal flow seen in the 2005-08 period is unlikely.  Equity fundraisings are returning only hesitantly, driven primarily by projects’ needs for funding and private equities' efforts to raise cash by exiting their oil investments.  Whilst a number of oil IPOs has been scheduled on the LSE since the beginning of 2010, only some of these fundraisings may succeed. Funding for exploration has been scarce and secondary listings have been almost the only success stories; however, more capital is becoming available for exploration, as well as for both geographic and technical frontiers in 2011:
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Nigerian Legislative Reform and Emergence of Indigenous Oil & Gas Sector in Nigeria

In 2009, the "Petroleum Industry Bill, 2009" was introduced in the Nigerian Senate. The Bill seeks principal changes that fall into five categories: 1) current petroleum profits tax legislation is repeal, 2) Nigerian National Petroleum Company (NNPC) break-up and transformation into a self-financing national champion like Brazil’s Petrobras or Malaysia’s Petronas; 3) revision of existing oil contracts, some of which were signed 10 or 20 years ago; 4) Downstream deregulation; and 5) local participation in the oil and gas sector - the proposed bill requires the government to promote "at all times" the use of indigenous companies, employees and local goods and services in the industry.

Under current agreements, nearly all of Nigeria’s oil and gas is produced through joint ventures between the NNPC and the major international oil companies such as: Shell, ExxonMobil, Chevron, Total and Eni. However, changes are well underway: for instance, when ExxonMobil offered $78m to renew three expiring 40-year leases in Nigeria, the Nigerian government responded with a counter-offer of $2.5bn. Similar negotiations have been reported between the Government and Shell, in particular. Furthermore, in September, news of negotiations between the Government and CNOOC indicated the value of around $30 billion in a bid for 6 billion barrels of oil, equivalent to one sixth of the proven oil reserves in Nigeria. Regardless of the precise size and the success of the bid, it places CNOOC in competition with the major western oil groups like Total, Royal Dutch Shell, Chevron and Exxon Mobil which operate the 23 blocks under discussion, and sets a level of competitive tension for the on-going negotiations between the Government and the Majors.

Whilst the eventual passage of the Bill is designed to renegotiate arrangements with major foreign investors and provide new investors with a modern and efficient administrative platform allowing for increased foreign investment, a distinct result of all of the above changes will be further growth of the Nigerian Indigenous Oil and Gas sector...

LB Capital, Platts 3rd Annual Crude Oil Conference, 27th -28th of May 2010 London


24th and 25th of September 2009, Istanbul

Key gas infrastructure projects and initiatives aiming at bringing additional gas volumes to Europe concentrating on the CEE / SEE are facing fundamental challenges across the gas value chain.  Attempts at solving primarily EU gas supply issues have acted as a catalyst for M&A activity in Downstream and Upstream in the CEE/SEE region and will result in further M&A activity in the Middle East, the Caspian and the CEE/SEE.  At the same time, at the commercial deal level, the initiatives have created conditions for best positioned CEE/SEE countries to become new regional gas hubs....

“Istanbul Program”