Opportunistic private equity firms preying on bombed-out offshore players

Some listed firms might be forced to exit the market.

Deep-pocketed private equity firms are using the oil price downcycle to snap up cheap oil and gas assets, and distressed offshore players in Singapore are also prime targets.

A report by DBS highlighted that mergers and acquisitions have gained traction since oil prices collapsed in mid-2014. For instance, Ezra wants to divest its 50% stake in EMAS AMC to reduce stress on its balance sheet, while Keppel has also revealed the acquisition of Cameron Offshore’s rigs business just a few months ago.

Apart from listed firms, private equity funds have also played a key role in recent M&A deals. For instance, SGX-listed subsea services player Kreuz Holdings was bought by SEA9 Pte. Ltd. (SEA9), a subsidiary of The Headland Private Equity Fund 6 L.P., a pan-Asian private equity fund.

“The traditional capital markets have become less accessible following the tumble in oil prices, opening up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as O&G firms look to lighten balance sheet and enhance cash flows,” said DBS.

DBS believes that offshore support vessel (OSV) firms listed in Singapore are prime takeover targets by PE firms.

“We expect the depressed valuations in the sector to lead to consolidation in the market, with companies having stronger balance sheets taking the opportunity to enhance their market shares while some players exit the market,” said DBS.

“We identify potential takeover targets to be Ezion, Dyna-Mac, Triyards and EMAS Offshore. We also identify companies with high cash hoards, such as Baker Tech, as good privatisation candidates,” noted the report.