January 2019

On the 3rd and 4th of December 2018, senior executives from the oil & gas and finance & investment industries gathered in London to review E&P and M&A activity in 2018 and look ahead to opportunities in 2019 and beyond. For those who missed it, here are the five key takeaways from the Assembly:

1. Financing Future Projects and Small & Mid-Cap Funding

Before committing to financing, investors need to see strong trust and honesty in communication, solid business plans that address any long-term cash flow dips, a commitment to new technology, price capital discipline and finally, significant evidence for a return on investment. The small-mid cap market must be able to demonstrate market access, be a proven low-cost operator, work effectively with local communities, demonstrate strong capital discipline, have a balanced portfolio of development and production, show visibility of long-term cash flow, have a committed management team with a proven track record, have lean and efficient operations and take the lead in digitalisation. The IPO window is expected to return when market sentiment improves, likely H2 2019.

2. Digitalisation and The Leap Beyond Cost Cutting

Oil & Gas companies need to be at the forefront of technology in order to lower emissions and drive the energy transition. The need to minimise capital investment together with price volatility and the drive for increased profitability and reliability is directing companies to commit to digitalisation. Embracing digital tools will not only improve safety but also allow companies to deliver higher value at lower carbon emissions. A high level of automation will drive a decarbonised future however the industry needs to be open to change and understand that technology will enhance human ability rather than replace it. Key areas of focus include: the need for fresh ideas from young talent, ensuring better quality and performance, breaking down barriers with prototyping and integrating hardware and software effectively.

3. The Importance of Gas

We are seeing an increase in demand for oil and gas, with particular focus on gas as a driver of the energy transition. The Majors and NOCs’ have invested in building up gas and are pushing it on the supply side. Gas, the cleanest of the fossil fuels, will continue to play a vital role in driving the energy transition and filling the gaps where renewable energy falls short.

4. Regional Spotlights

The East Med is set to become a major new player in the world of energy once the midstream challenges have been overcome; Latin America’s success story Guyana includes 10 discoveries and 5 billion barrels of oil in 30 months; Africa's biggest challenge is access to debt capital and its biggest opportunity lies in Private Equity. Finally, the North Sea needs to see sustained investment.

5. Outlook for 2019

Markets are stronger than expected giving rise to new projects although breakeven prices do need to be reviewed; there is a trend towards a hybrid structure as well as Reserve Based Lending but complimenting RBL are alternate sources including senior and junior debt. Fear remains around geopolitical risk, an increasing number of assets will be put up for sale; we will see some reshuffling of big oil and debt capital will be more prominent than equity capital in emerging markets.

The future continues to be bright for the industry, with key factors of success being securing finance, reducing production costs and lowering emissions. We are already planning for the 11^th World Energy Capital Assembly, 2- – 3 December 2019, Hilton Park Lane, London. If you would like to get involved in shaping the content for the Assembly please contact Pippa Brown, Director EMEA, [email protected].