Private equity new oil rival, says Woodside
WOODSIDE chief Peter Coleman says private equity players have emerged as the new competitive threat in oil and gas acquisitions.
WOODSIDE Petroleum chief executive Peter Coleman says private equity players have emerged as the new competitive threat when it comes to oil and gas acquisitions.
Mr Coleman, fresh from announcing a $US3.75 billion ($4.6bn) purchase of a suite of assets from US company Apache Energy, told The Australian that private equity firms were stepping up to fill the void left by a drop-off in merger and acquisition appetite among conventional oil and gas players.
“Assets that are de-risked are very attractive to the PE guys,” Mr Coleman said.
“There’s a lot of money available today in the marketplace to allow people to leverage that and make a yield play on it.”
Woodside has flagged its willingness to continue pursuing more acquisitions in the wake of the Apache deal, which will see it take stakes in the under-construction Wheatstone liquefied natural gas project in Western Australia, the nearby Balnaves oilfield, and the large but early-stage Kitimat LNG project in the western Canadian province of British Columbia.
A near-halving in oil prices in recent months has seen equity and asset values plunge across the oil and gas sector, opening up opportunities for cashed-up companies such as Woodside to snap up assets at discounted prices. The Apache deal saw Woodside acquire the interests for less than the amount Apache had spent developing the fields, reflecting the sudden change in asset valuations across the sector.
Mr Coleman said the increased activity of private equity players looking for oil and gas opportunities had added another dimension to the sector’s M&A landscape, with assets in the US of particular interest to private equity.
“We’re not just competing in the marketplace today with conventional oil and gas players,” he said.
“You’re seeing this play out particularly in the US in the lower 48 (states), we’re competing quite aggressively with the private equity guys. It suggests a new kind of buyer in the market we have to deal with.”
The Australian’s DataRoom column revealed in the lead-up to the Apache deal that at least two private equity-linked groups were bidding against Woodside for the assets. Harbour Energy, a joint venture of Asian commodity trader Noble Group and private equity firm EIG, was among the bidders, while the assets also attracted an offer from Singapore’s Pavilion Energy — an arm of sovereign wealth fund Temasek.
Mr Coleman said the rise in competition from private equity had helped offset a fall in interest from the big national oil companies, which had been very active acquirers until recently.
“There’s still a lot of competition,” he said.
“Two years ago I would have said it was national oil companies (who were competing for M&A), now we’re actually at a nice spot because as a conventional oil and gas company we’re able to compete very well.
“But along come the PE guys who are looking at opportunities for assets. There’s a lot of money available at the moment — a lot of money — for de-risked assets.”
Mr Coleman has said the company will continue looking for acquisitions. Analysts have estimated that Woodside could absorb another acquisition of $US2bn-$US3bn without needing to issue more shares.
Mr Coleman has indicated that Woodside would be interested in an additional stake in Wheatstone should Chevron look to sell down some of its 64.1 per cent controlling interest in the project.
The company has been scouring the world for investment opportunities under Mr Coleman, as it looks to deploy a growing multi-billion-dollar cash pile and replenish a development project pipeline that has looked all but bare in recent years.
It has picked up exploration acreage in no less than seven countries around the world, while a proposed acquisition of a stake in the Leviathan gasfield off Israel fell over earlier this year after the parties were unable to agree a price.
Shares in Woodside closed 55c, or 1.4 per cent, lower yesterday at $38.30.