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Private Equity Gearing Up To Ramp Up Oil & Gas Investment

Big Offshore Rig

A global survey released Monday by Ernst & Young shows that private equity firms are getting ready to invest more capital in the energy sector, specifically oil and gas. Of the 100 companies surveyed, 25 percent of those firms are planning to make acquisitions by the end of the year, and 43 percent will do so by the first half of the coming year.

Out of the 71 percent of the respondents that were considering new ventures, 62 percent said that joint ventures and drilling companies as the most popular investment considerations, while 59 percent named contingent pricing as their option.

The survey noted that investor’s interest was being drawn by the increase in the demand for energy in emerging countries.

Claire Lawrie, the energy lead for Ernst & Young Africa stated that 80 percent of the companies responding to the survey believed Africa will see an increase in energy demands, and that deal-making will grow on the continent. Stated Lawrie: “Investors are being drawn by the promise of new infrastructure initiatives across the continent, opening up new trade routes and enhancing regional integration, such as rail and port developments in Mozambique and Angola, as well as stronger regulatory systems in many countries such as Kenya and Ethiopia.”

According to the report, the private equity firms surveyed said that they were interested in the midstream and upstream segments of the industry, viewing those two sectors as having the greatest potential for a return on investment. Lawrie added: “PE firms have an important role to play in today’s transforming oil and gas sector. Opportunities will continue to emerge over the course of the year as more companies succumb to the new normal oil price environment. Funds looking to invest will need flexibility, patience and clear strategic plans to take advantage of a buyer’s market.”

Lincoln Brown for Oilprice.com

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