PE firms seek novel ways to exit from oil investments

Bloomberg

Private equity firms that piled into oil-production assets in the past few years now find themselves stuck, and forced to contemplate novel ways to make an exit.
Even with the recent vaccine-induced surge in oil prices, industry executives say initial public offerings — the traditional method for realising gains from private-equity consolidation and dealmaking — are unlikely.
So one recent deal, the planned reverse takeover of Premier Oil Plc by Chrysaor Holdings Ltd, has caught their attention.
“There are hundreds of private companies that need to merge, need to go public or monetise in some way,” said Dennis Cornell, managing director of private equity solutions at Moelis & Co, a boutique deals adviser. The Premier transaction could be a “harbinger of things to come,” he said at the virtual SPE Upstream Finance and Investments Conference this week.
Private equity-backed companies have made particular inroads into exploration and production (E&P) in the North Sea. They’ve scooped up assets as Big Oil retreated from aging fields. Since last year, many closely held oil explorers and producers have paused plans to go public. The list includes North Sea producers Siccar Point Energy Ltd, Wintershall Dea GmbH and Neptune Energy Group Ltd.
A spokesman for Wintershall Dea referred to comments made by its CEO  Mario Mehren earlier this year that its IPO has been postponed to 2021, subject to market conditions. Siccar Point and Neptune didn’t immediately respond to a request for comment.
The problems started in 2019, when fossil fuels lost their appeal to investors due to environmental concerns. The situation got a whole lot worse earlier this year, after oil demand and prices collapsed in the first wave of
the coronavirus. Asset sales slowed and the pool of potential buyers has dried up.
IPOs worked well when oil was still “fashionable and profitable,” said Jules van Limborgh, director at Kerogen Capital, which backs North Sea explorer Hurricane Energy.