OIL and gas entrepreneur Tom Cross has said the Parkmead Group he runs still plans to expand in the North Sea in 2015 in spite of the slump in the oil price.
However, while there have been warnings firms will slash investment in the North Sea next year, other companies are eyeing the area and Mr Cross could face competition for deals.
Mr Cross said Aberdeen-based Parkmead is up for more acquisitions in the North Sea, after completing a series of deals in recent months.
He believes the company is in good shape to capitalise on the opportunities that might come up as the near 50% fall in the oil price since June creates problems for others.
" As a key North Sea consolidator, Parkmead is in a position of commercial and financial strength to continue our acquisition-led growth strategy," said Mr Cross, who built Dana Petroleum into a £1.8 billion group with a big North Sea business.
Mr Cross added: "The decrease in the oil price will result in more acquisition opportunities becoming available."
Noting that Parkmead takes a long term view of the oil price, Mr Cross said the United Kingdom Continental Shelf remains an attractive place to invest.
He welcomed the Coalition Government's policies to stimulate activity in the North Sea, such as the two percentage point reduction in the tax rates announced in the Autumn Statement.
Mr Cross's confidence may partly reflect expectations that the fall in the oil price may pose big challenges for small firms that don't have the financial muscle to help them ride out the expected downturn in the industry.
Parkmead had £46m cash at the end of the financial year to 30 June, during which the company made its first annual profit.
Richard Spilsbury, a partner at accountancy giant PwC, said firms with good cash and limited debt should be ok.
But warning that companies with small assets bases and high costs will struggle, he said the oil price fall could trigger a bout of consolidation among smaller players in the next six to 12 months.
Drew Stevenson of PwC said financial investors with a remit to invest in the energy sector could support the development of new platform companies that would consolidate assets.
Derek Henderson, a partner in the energy resources practice at Deloitte, said he is working with firms from the UK, Canada and the Middle East that think the time may be right to increase their exposure to the United Kingdom Continental Shelf (UKCS).
Mr Henderson said: "People are not blind to the fact that the commodity price is moving but businesses are definitely looking. There's no question."
He added: "There's always a deal to be done if the price is right."
But experts warn that firms could be deterred from investing in the UK North Sea unless there are big changes in the area.
Warning recently that 10 per cent of jobs in the North Sea could be shed in the next 18 months, oil services tycoon Sir Ian Wood said the area faced challenges even before the oil price fell. These include high operating costs.
Mr Henderson said industry players had to take the collaboration agenda championed by Sir Ian seriously, noting there is big scope to boost efficiency in the North Sea.
Mr Spilsbury said the difficulty estimating the cost of decommissioning assets in future could make it hard to agree deals.
He noted a lot of North Sea assets have been on the market for some time.
Moves by oil and gas firms to respond to the lower crude price environment will also encourage consolidation in the oil services industry.
Majors will want to work with bigger suppliers with balance sheets capable of withstanding tough times.
Dane Houlahan, a partner at KPMG, said some large services firms will buy businesses in their supply chain to buy profit margin back in.
Halliburton's planned $38bn takeover of Baker Hughes could trigger other deals.
While the oil price fall may encourage firms to sell off non-core assets there may be fewer private equity buyers.
Following a surge in interest in oil services firms in Scotland amid booming investment in the area in recent years, experts predict generalist investors will shift attention to other sectors.
Andrew Kerr moved from Aberdeen to lead a drive by Ernst & Young to win more Central Belt business this summer. However, he said the downturn may trigger increased interest in the area among specialist investors, who might expect prices to fall.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article