ACN acer energy limited

Latest article...i think the ACN's management will have a lot of...

  1. 80 Posts.
    Latest article...i think the ACN's management will have a lot of chances to pull in big/rich JV partners with their solid/firm oil reserve and unconventionalpotential ...dont forget the previous Arrow management team is in ACN now an anything can happen in future!

    Australia’s small to mid-cap oil and gas sector is attracting the attention of cashed-up private equity funds in North America seeking investment opportunities in low-risk countries able to access higher-priced gas markets in Asia.

    Companies such as Liquefied Natural Gas Ltd and onshore gas explorers in Queensland and the Cooper Basin have been fielding inquiries from various PE funds looking to invest growth capital.

    At least one North American PE fund is also understood to be exploring the possibility of a “rig club”, amalgamating demand for oil field services by smaller explorers in Australia looking for a lower-cost option for drilling capacity to go after onshore targets including shale gas.

    A group of private investors in Western Australia with experience in the shale gas sector in North America is meanwhile believed to be considering a $40 million investment to fund a “frac crew”, with the expertise and equipment to carry out hydraulic fracturing operations for onshore wells.

    Some $US45 billion ($43?billion) is sitting in PE funds in North America, where 10-year low natural gas prices have contributed to a “stand-off” between buyers and sellers of petroleum assets on valuations, according to Emilie Sydney-Smith, director of private equity at boutique capital raising and M&A advisory Origin Capital Group.

    That is prompting funds to look to Asia Pacific where average profit margins can be double those in the US.

    The pricing issue in North America “is certainly making things harder,” Sydney-Smith says.

    “There’s a lot of money going into unconventional, but that’s an area that unless you are in the liquids-rich side that can be a very tough business.”

    Overseas PE funds have only a patchy track record of investment in Australia’s oil and gas sector, although EIG – then TCW Group – was on the ground early in Queensland’s coal seam gas sector, investing in the Fairview field now owned by Santos’s GLNG venture.

    It was also an investor in Coogee Resources, although exited on Coogee’s takeover by Thailand’s PTTEP.

    More recently, Barclays Capital has backed Paul Nimmo-led oil development company Hydra Energy, with a view to investing in undeveloped discoveries and late-life assets in Australia.

    In Singapore, US PE energy specialist First Reserve is backing KrisEnergy.

    The Sentient Group has tended to focus more on mining, although it holds investments in coal seam and shale gas explorer Senex Energy and in geothermal energy developer Geodynamics.

    In any case, PE investment in the sector has been as a provider of growth capital, rather than as?a?leveraged buyout operator.

    One of the problems for PE funds has been the thinness of the mid-cap oil and gas sector in Australia, leaving a yawning gap between the international majors and large local companies such as Woodside Petroleum and Santos, and the juniors at the other end of the spectrum, says Tony Schultz, managing director of EIG Global Energy Partners’ Australian arm.

    Most investment opportunities that have arisen have been in offshore petroleum, involving a large capital commitment and high risk, he said at a conference in Sydney this week.

    At the same time, easy access to investor funds by listing on the Australian Securities Exchange, even for early-stage companies, and a lack of familiarity with private equity in the Australian oil and gas sector, have made the task to find suitable investments harder for PE firms.

    But the growing interest in shale gas exploration could open up more opportunities, Schultz said.

    He pointed to the long history the PE sector has had in investing in the shale gas sector in North America, where EIG itself is a long-term backer of Chesapeake Energy.

    PE funds tended to shy away from exploration ventures, but have found plenty of opportunity in the shale gas sector in North America thanks to its ongoing need to deploy capital in the development phase for drilling and infrastructure.

    While shale gas in Australia is still in its infancy and probably too-early in its development to interest most PE funds, the oilfield services sector is attracting attention.

    “There are so many gaps in the oilfield services market over here that I think a lot of the first deals will be private equity funds trying to fill those gaps,” Origin’s Sydney-Smith says.

    “The unconventionals have really drawn services away from the conventional and created a gap.”

    For small explorers, PE funds offer an attractive and deep source of capital as long as their requirements are met.

    “They demand strong returns but they are very supportive and will follow their money in if they can see it doubling and doubling,” says Senex chief executive Ian Davies.

    “But the strategy has to be there, they’ve got to have a strong management in place and they’ve got to believe in the underlying market story in whatever the commodity is.”

    The introduction of a carbon tax in Australia appears not to be too much of a disincentive for PE funds.

    Schultz at EIG, which has $US10 billion invested in the energy and resources sector across the world, describes a carbon price as “a disadvantage” but says it would just be one factor taken in to account as his company weighs up potential investments across different markets.

    “Everything starts with a quality asset,” he says.
 
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