Private equity participation in the oil and gas industry is well past its infancy in North America with PE-backed deals accounting for 65 percent of the aggregate value in oil and gas buyouts between 2006 and 2014. In Asia, while international exploration and production groups and, more recently, national oil companies have been the key drivers of deal activity, private equity involvement has been increasing, particularly since the global financial crisis in 2008.
Pressures on liquidity
Roger W. Jenkins, president and chief executive of Murphy Oil, noted that the proceeds from the partial sell down of its Malaysian assets in 2014 were to be used for “strategic and financial initiatives, such as increased drilling capital in the Eagle Ford Shale, acquisition opportunities, debt reduction and share repurchases”.
Numerous private equity funds and vehicles are training their sights on Asia, while strategic players are in the midst of a retreat. Recent big ticket moves include the formation of Neptune Oil & Gas (which counts Southeast Asia as one of its three core markets) and Magna Energy (which will focus on the Indian sub-continent). The success of these private equity funds and vehicles, however, will depend on how well they tailor their strategies in the fragmented and challenging Asian environment.
Brad Roach is a partner in the Singapore office of Gibson, Dunn & Crutcher LLP and has extensive experience on mergers and acquisitions of E&P (exploration and production) companies in Southeast Asia. Karthik Ashwin Thiagarajan is an associate in the Singapore office of Gibson, Dunn & Crutcher LLP who specialises in mergers and acquisitions/private equity transactions in Southeast Asia.