One of BP’s former advisers has formed a new advisory firm as the oil industry becomes “comfortable with itself” again and firms prepare to make “brave decisions.”
A former adviser to BP and Chevron Corporation, Martin Lovegrove, has established a partnership with a former oil and gas banker at Citi to form an advisory firm, Niels Kirk, to form Kirk Lovegrove and Company.
Ensco, an offshore driller, agreed to acquire Rowan, its rival, in an all-stock deal that amounted to $2.3 billion on Monday that confirmed the assertions of the pair regarding the sector.
Lovegrove said that the industry was getting “comfortable with itself” again. However, he warned the companies not to get too complacent in the coming months.
The prices of Brent crude oil have increased in recent weeks. It rose above $80 per barrel for the first time since 2014 and the commodity was trading at $83.42 per barrel last Monday.
In the intervening four years, crude prices dropped to $30 per barrel in January 2016 prior to embarking on a steady increase.
Lovegrove stated: “The industry is getting comfortable with itself after the woes of the last few years and we could see a growing level of activity over the next 18 months.”
He added: “Providing oil prices stay plus or minus $5 from where they are, we will see more brave decisions being made.”
He continued: “Whether we will see more M&A activity as opposed to asset activity, never say never.”
However, Lovegrove stated that “house cleaning” – companies that are reorganising their assets – was more likely.
He stated: “Yesterday’s core assets might be today’s non-core assets.”
He continued: “Over the longer term large companies are reshaping their portfolios to include alternative energies, over the next 15-20 years, which for the majors isn’t that long.”
Harrison Lovegrove, the most recent company of the oil industry adviser, was acquired by the Standard Chartered bank in 2007.
He then served as the adviser of BP on the $7.5bn sale of part of its North American and Egyptian assets to Apache Corporation which came months following the Gulf of Mexico oil spill, which cost the oil giant billions of pounds.
Recently, Kirk served as the adviser or Neptune Oil & Gas on its acquisition of the oil and gas production and exploration business of Engie.
The combined entity would now have an enterprise value of $12 billion and own a fleet of 28 rigs and 54 jack-ups, with operations in Brazil, West Africa, and the Gulf of Mexico.