Wednesday 22 February 2012

Shell to buy Cove oil

A bid for 200p odd for Cove from Shell today. Interesting to see the revived interest in North Sea Assets, I hold Xcite Energy, Ithaca and Xtract in my current portfolio. Last year these shares were smashed to pieces as their funding routes for expensive drilling and production dried up. Cove is not a North Sea exploorer but sahres the same profile of being a small Aim company that has been successful in exploring for oil, in their case off Mozambique.

In this year's early bubble, confidence is back and also the major oil producers have not been so successful themselves with their own drilling. Indeed, a pharma-type industry model is rapidly developing where exploration is done by small companies and then the big guns arrive to develop the actual production.

Of course, this has always happened to some extent, but with oil resources rapidly depleting (until shale oil really gets going in a few years), the SuperMajors have struggled with their own exploration - and this is despite huge improvement in seismic scanning and other technologies that de-risk so called 'wild cat' drilling.

Another noted impact is that the AIM companies are back in favour, despite the lack of change in bank funding which caused them to collapase int eh first place. A high price for oil, now above $100 a barrel for an extended period of time, seems to have improved confidence that economic production can take place.

Last year saw the takeover of Encore, now Cove too. Ithaca is subject to a bid. It is a busy year for North Sea M&A and I need to develop a bigger watch list as this period of consolidation is likely to go on for some time.

6 comments:

Old BE said...

So Osborne's oil tax has destroyed the North Sea industry.

Nick Drew said...

indeed not, BE

(as we pretty much knew at the time)

CityUnslicker said...

Did not help it last year ND!

High oil prices have saved it really.

Old BE said...

Just re-read ZurichUnslicker's post and realised he didn't actually predict the demise of the oil industry.

Apologies for my poor memory.

Budgie said...

GPK and Xcite down substantially today though.

CityUnslicker said...

back up now, profit taking always going to happen on such steep rises.