LONDON (Reuters) - Private equity giant Carlyle sees further declines in oil prices before a wave of asset buying that will focus on existing fields rather than exploration projects.
Global crude prices have more than halved to around $50 a barrel in the past six months, slashing company values, forcing budget cuts and putting more than $150 billion of oil and gas exploration projects in jeopardy this year. [ID:nL6N0TN2KU]
But with risks come investment opportunities, as oil companies ranging from multinationals to wildcatters seek to shed assets in order to maintain their balance sheets.
“After a crash like this, there is clearly more upside than downside. This will be a great time to invest but there is no need to rush into it, because I don’t think we have seen the bottom yet,” Marcel Van Poecke, managing director of Carlyle International Energy Partners, told Reuters.
“What we like to invest in is clearly production. People would much rather buy production than go into a three- to four-year development.”
Van Poecke expects merger and acquisition activity to accelerate towards the middle of the year once oil prices stabilize and companies assess their position.
Having made his name and fortune in oil refining during the peak years of the early and mid-2000s, the Dutchman today heads international energy investments for Carlyle, which has more than $200 billion globally under management.
Costly exploration projects, often located in deep water or remote areas, which take around four years and billions to develop are no longer as attractive and will find it difficult to find the necessary capital.
“Some of these projects just don’t work at lower prices. The infrastructure costs are too high, the production costs are high,” van Poecke said.
Investors are zooming in on wells in the North Sea, West Africa, Southeast Asia and Latin America, he said.
In the United States, Carlyle sees growing investment opportunities as companies involved in shale oil and gas production run out of capital, van Poecke said.
“Companies will go bankrupt and others will buy the assets and start all over again at lower prices,” he said.
Editing by Dale Hudson