UK North Sea M&A gains pace with NEO, Waldorf deals

Speaking after NEO Energy and Waldorf Production announced M&A deals on 9 March,  Neivan Boroujerdi, principal analyst, Europe upstream, said: “The latest acquisitions continue what has been blockbuster start to the year for UK M&A with buyers (and sellers) buoyed by the recent recovery in prices.

"Just over two months into 2021 and UK disclosed deal spend has reached US$2.7 billion, almost equalling last year’s total, making it one of the hottest markets globally.

“Despite the UK’s maturity, the deals highlight the attractiveness of the country’s relatively low headline tax rate, which enables assets to generate significant free cash flow at current prices."

He added: "We estimate up to another US$5 billion worth of assets could change hands this year. The list of UK sellers is broad.

"The supermajor sell-off will continue and other private equity-backed vehicles may look to follow Zennor-backer Kerogen’s lead and monetise their investments.”

Boroujerdi said: “The sale of private equity-funded Zennor doesn’t come as a surprise. Its backer Kerogen was nearing the end of its five-year investment cycle and having recently sold its stake in Energean, this was likely to follow.

“The sale to HitecVision-backed NEO energy is effectively PE selling to PE, but at completely different ends of the cycle. It marks NEO’s second acquisition from HitecVision’s recently closed North Sea opportunity fund and its third in total, following the UK asset acquisitions from Total and ExxonMobil.

“This latest transaction takes production to 80,000 barrels of oil equivalent per day, catapulting it into the 5th biggest producer on the shelf, behind just Total, BP, Chrysaor (soon to be Harbour Energy) and Shell.

“Cairn Energy has had a history of selling down assets and building up new core areas. The sale of UK assets to Waldorf Energy, on the same day it announces an entry into Egypt, is very much on brand.

“The deals will help shift its hydrocarbon split towards gas while retaining its balance sheet strength, which was bolstered by last year’s sale of Sangomar in Senegal.

"Newcomer Waldorf Energy will looking to replicate the growth of some other PE-backed players that have shaken up the shelf in recent years. These latest deals suggest a(nother) passing of the torch.”