Private Equity Investment Alters the UK North Sea Oil and Gas Industry

Private equity investment has been changing the face of the investment landscape in the UK’s North Sea oil and gas industry. As global oil and gas majors begin to look elsewhere for investment priorities, an increasing number of private equity buyers are stepping in and looking at new ways to bring developments on stream or to squeeze more life out of existing oil and gas fields in the region. 

More than $12 billion in private equity investment has flowed into the sector over the past couple of years, with analysts at the Wood Mackenzie consultancy forecasting a further $13 billion to be deployed. Global oil and gas exploration and production company Nobel Upstream has ongoing interests in the North Sea, with a 7.6 percent stake acquired from Shell in the Maclure field in 2016, and successful appraisal of the Ballindalloch field leading to ongoing development and first production from the field in July 2019. Nobel Upstream also continue to actively pursue new opportunities in the region, stating that the UK sector still has significant opportunities for investment.

Oil Price Stabilisation and Tax Incentives

The recent stabilisation in the price of oil has helped to drive a new wave of private equity investors in the region. As the valuation gap between buyer investment appetite becomes more closely aligned with seller expectation, transaction success becomes more assured. Deal structuring innovations combine with an increased willingness on the part of the vendor to reflect realistic pricing, making the area more attractive to investors. Tax incentives introduced since 2015 have also helped to incentivise investors. Following the Wood Review in 2014, the UK government scrapped the 50 percent Petroleum Revenue Tax and reduced the Supplementary Charge Tax to 10 percent from 20 percent, in line with the Maximise Economic Recovery (MER) agenda. 

Exploring Private EquityInvestment

Refocus of the Major Companies

The major players in the global oil and gas industry are increasingly looking to explore and develop new resources of hydrocarbons on a global scale, rather than squeezing more life out of mature plays such as the UK Continental Shelf. Pressure to ensure profitability is maintained and shareholder dividend flow is ensured have led to many of the major companies implementing aggressive strategies for divestment of non-core portfolio assets. This portfolio rationalisation, designed to help the major companies cut operating costs and streamline business operations to improve overall profitability, means that there are many assets in mature fields, such as the North Sea, coming up for grabs. Private equity investors, who are better placed to focus on cost optimisation and incremental recovery, are therefore seeing more and more opportunities enter the market as the major players focus more on frontier projects.

Improved Understanding of Private Equity

Oil and Gas UK (OGUK) has contacted leading financial figures in the North Sea region to acquire a better understanding of private equity in order to be better able to keep up with the industry. One of the challenges presented by this “changing of the guard” in terms of financing in the North Sea is the need for existing companies to educate themselves about how private equity works. Oil and gas companies are having to learn more about how private equity-backed companies do business, looking at alternative financing structures and sources of capital. Financing structures are continuing to evolve, particularly with regards to decommissioning, so it is essential that the oil and gas industry has a strong grasp of what this means in terms of inbound investment.

Learn more about what private equity investment is in the PDF attachment to this post.

UK Launches First National Data Repository for Oil and Gas

The first National Data Repository (NDR) for the UK Oil and Gas industry is set for launch in early 2019 from the Oil and Gas Association (OGA). The repository will be used to store and publish information relating to petroleum in one collection, including infrastructure, well, field and geophysical data, delivering inward investment and added value to the UK. You can learn more about what an NDR is and how it works in the PDF attachment to this post.

Introducing National Data Repositories

Operational Agreement

An agreement has been reached between the OGA and Common Data Access Limited (CDA) regarding the operation of the NDR. It is hoped that this agreement will help the OGA as it works to unlock new North Sea resources. This would be good news for oil and gas companies with operations in the North Sea, including independent oil and gas exploration and production company Nobel Upstream. Nobel Upstream has recently acquired a stake in the Maclure field in the North Sea and continues to actively pursue more opportunities in the region that meet the technical and economic criteria of the company. Nobel Upstream, together with its partner Maersk Oil (since acquired by Total) successfully appraised the South Maclure prospect and is now developing this multi-million barrel oil field.

Critical Digital Infrastructure

The launch of the NDR will introduce a critical aspect of digital infrastructure to the UK oil and gas industry. Definitive information will be provided through the NDR to help unlock the remaining resources of the UK Continental Shelf. Extra value will be delivered for the sector by the OGA through the provision of trusted, enhanced data on the widest terms possible. The deal between the OGA and CDA, which is an Oil & Gas UK subsidiary, is for two years of operation of the NDR, which builds on the CDA’s 20-year existing service. A procurement process has commenced for the OGA-operated NDR, with an expected service commencement date in 2021.

The NDR is a key component in the delivery of Vision 2035, stated OGA’s director of corporate Nic Granger. You can learn more about Vision 2035 in the embedded infographic.

Data Collection

CDA has been working in collaboration with the oil and gas industry in the UK for 25 years, said Malcolm Fleming, chief executive of CDA. A unique collection has therefore been established of well and seismic information on the UK Continental Shelf, which will be placed at the centre of the new NDR. This will ensure data preservation as well as making it available for disclosure to all under conditions of open licence and for sharing among all licensees. It is expected that the NDR will prove to be a resource of inestimable value to technology innovators. These innovators will be able to use the data provided to work on solutions for the application of artificial intelligence and machine learning techniques to meet the challenge of searching deep in the subsurface to locate deposits of oil and gas.

The provision of data through the NDR will help achieve MER UK as well as delivering extra value to the oil and gas investment sector. You can find an overview of MER UK in the short video attachment to this post.

Introducing the MER UK Forum

OGA Open Data Centre

The launch of the new NDR is part of the ongoing objective of the OGA to make more information and data available openly with a view to facilitating performance improvements within the oil and gas industry in the UK. As part of this mission, the OGA Open Data Centre, which provides free, user-friendly access to a vast range of data, has recently been upgraded. The Centre includes data that can be shared, downloaded, charted, mapped, styled or viewed under the Open Government Licence terms and conditions.

The New Illusion® Spire Frac Plug from Halliburton

Halliburton has recently announced the release of the Illusion® Spire, the first frac plug that is both dissolvable and fluid efficient. The capabilities of currently available dissolvable frac plugs are expanded on with the Illusion® Spire, which features less mass and a larger diameter for improved efficiency. In the PDF attachment you can learn more about the history of frac plugs and the difference between dissolvable and composite versions.

Nobel Upstream - Composite Vs. Dissolvable Fracture Plugs

Halliburton is the major service provider to Nobel Upstream of hydraulic fracturing services. The Illusion® Spire is currently the most advanced frac plug available on the market.

Faster Time to Production

The time it takes to bring a well onto production in the unconventional market is critical. Plugs with more traditional designs can lead to excessive volumes of fluid and suboptimal conveyance. The Illusion® Spire technology from Halliburton Completion Tools has been specifically designed to include a water saving element, meaning the completion time is reduced as the operators of the well are able to pump faster. The plug also has a reduced size, resulting in a quicker drive and more consistency for the time of dissolution. This helps to maximise the asset value for operators through substantial increases in flowback and lower water costs.

Field Trials

Halliburton has conducted multiple field trials with the Illusion® Spire in basins in North America. The results of these trials saw unprecedented improvements in both time efficiency and fluid efficiency when compared to the results achieved by other frac plugs available on the market. The overall pump time in a typical wellbore is reduced and the potential is shown to be there to save thousands of barrels of fluid.

Illusion® Spire Benefits and Features

The Illusion® Spire builds on previous successes from Halliburton with the Illusion standard frac plug, with a 45% increase in internal diameter complemented by a 32% reduction in length. These altered measurements yield greater production and placement efficiency, improving flowback and increasing pump-down efficiency. The plug is sized for a 5.5-inch casing. An anti-preset feature is included for setting at depth, as well as the inherent pump-down water saving feature. Neither of these new features compromise the pressure-holding performance or the reliability of the plug. The full internal diameter of the wellbore is achieved, decreasing dissolution time, while the pressure rating of 10,000 psi ensures performance levels remain high even in demanding fracturing stimulations. The pioneering plug design from Halliburton, which includes fully dissolvable rubber and metal, removes the inherent costs and risks of removing a conventional plug. You can find out more about Halliburton in the attached infographic.

Standard Illusion Benefits and Features

The standard Illusion frac plug is also dissolvable and has been field-proven, providing zonal isolation for the artificial stimulation of reservoirs. Upon dissolution, the Illusion opens the wellbore to the full inside diameter to optimise operations. The Illusion is sized for both 4.5-inch and 5.5-inch casings and has the same psi pressure rating of 10,000 as the Illusion® Spire. The composition of the Illusion plug dissolves fully based on salinity and temperature to eliminate removal risks and reduce overall operational costs. It is capable of handling pump-down rates even when accelerated and maintain high performance in demanding stimulations. The large ID of the Illusion plug assists in well clean-up and immediate flowback.

In the short video attachment you can find out more about what hydraulic fracturing well stimulation involves. Halliburton has provided several case studies on the company website for both the Illusion and the Illusion® Spire.

What Is Hydraulic Fracturing Well Stimulation?

New Intelligent Drill Bit from Halliburton

Halliburton Company has recently released a new intelligent drill bit, the Cerebro in-bit sensor package. The revolutionary product contains brand new technology that allows for performance data to be obtained directly underneath the drill bit, using that data to analyse and improve performance. The Cerebro increases the efficiency of the drilling, reduces uncertainty, and optimises cutter engagement.

Halliburton is a major supplier of services such as hydraulic fracturing, logging and wellbore cementing to independent oil and gas exploration and production company Nobel Upstream, which has a global presence and operations in the UK, the US and Azerbaijan. You can view the corporate profile of Halliburton in the PDF attachment to this post.

CORPORATE PROFILE OF HALLIBURTON

Optimising Performance with Cerebro

Cerebro identifies in real time areas where performance is not optimal - whether due to operating parameters or inconsistent design - throughout the entire run. The drill bit constantly captures motion data and downhole vibration, helping operators to accurately and quickly identify where damage to the bit occurred. Several common drill bit factors are identified by the system, including torsional resistance, whirl, axial and lateral vibration, and stick-slip, which can have a negative impact on the speed and reliability of the drilling. Advances have been made by Cerebro in terms of communication between the operator and the drill bit, as data is collected as close as possible to the cutting structure. With a more in-depth understanding of exactly what is occurring downhole, manufacturers can help optimise performance for operators through improved performance and design of the drill bits.

In the infographic attachment you can learn more about the sustainability principles that act as a foundation for the work of Halliburton.

High-Speed Measurements

One of the key advantages of the Cerebro intelligent drill bit is that measurements can be taken accurately even at very high speeds and recorded throughout the entirety of the run. The sensor takes samples of measurement data and delivers the processed information from that data in the form of a standardised report through the software programme, bringing operators real-time information about areas where vibration has been significant or where the bit rotation has been inefficient. This provides operators with the information they require to ensure that performance is optimised at every stage of the procedure.

InSite Platform

The proprietary software interface for Cerebro is delivered to the client on the InSite platform, which has algorithms built in and can reveal any occurring issues while the bit run is happening. This allows for adjustments to be made to enhance the drill bit performance. The storage capacity of InSite is large, with over 150 hours of recording time, supporting technical analysis on a remote basis from anywhere at any time. Data capture occurs continuously and at a high, 1,000Hz frequency, to support performance optimisation. The InSite platform can also produce more detailed and in-depth measurement reports and more data analysis to assist operators.

Cross-Environmental Use

Cerebro is designed to be used across multiple environments without losing quality of information. While primarily used in hard rock formations, steerable applications or deep unconventional wells with Fixed Cutter drill bits, the design is flexible enough to be able to adapt to other tools and bits with connections of the same dimensions. This flexibility means superior Cerebro data capture and analysis can be utilised in virtually all forms of drilling environment. [4]

Halliburton focuses on quality in both its product offerings and in providing support to local communities and charities. You can learn more about this by watching the short video attachment to this post.

Community Support from Halliburton