AAM plans to set up £ 60 mm North Sea fund

Oct 31, 2004 02:00 AM

Aberdeen Asset Management is leading efforts to create a £ 60 mm-plus fund to invest in the recovering oil and gas industries.
The North Sea energy sector has been in the doldrums for years but a number of north-eastern investors believe that with oil at over $ 50 a barrel, the sector's prospects have improved dramatically. They envisage a series of funds worth around £ 60 mm, the first of which would invest mainly in services and technology. Some of the cash could also go into the exploration and production sectors where activity is still slow.

Lime Rock, the private equity house, and venture capital firm 3i have been sounded out about the idea and support is likely to be sought from the banks.
Jock Gardiner, head of private equity at Aberdeen Murray Johnstone in Aberdeen, said: "We have a good track record and there is no point delaying it for three or four years. The dynamics now are good. There may be a two or three year window for everybody to capitalise on opportunities at this price level."

The North Sea market has been shaken up by the gradual departure of major oil companies such as BP and the arrival of niche players like Talisman and Apache. At the same time, new technology is driving down the cost of getting oil out of fields which were once considered marginal.
Even with the prospect of the oil price falling back to $ 30 per barrel, investors believe serious profits can be made in the North Sea because costs were cut back to little more than $ 10 per barrel when the price collapsed four years ago.
Gardiner, who has been working on the idea for the last six months, said: "There are three venture capital houses in Aberdeen -- ourselves, 3i and Lime Rock. The opportunity is there. The question is how to crystallise it."

He added that it would be harder to invest in exploration or production opportunities without more cash: "We wouldn't be in the business for a 100 % exploration fund. You are not going to be able to change the world with [£ 60 mm] so the initial focus will not be on exploration. Anything that we did in that field would be a wee flavour."
Aberdeen Murray Johnstone is in buoyant mood after a number of successful investment exits. It sold stakes in Voxar, the Edinburgh medical imaging company which was bought by Barco of Belgium earlier, and Morning, Noon & Night, the shop chain, acquired by Scotmid in August.

Gardiner said AAM's private equity arm was looking at more possible deals now than at any time over the past 12 months.
AMJ is also investing in more early stage prospects through its Nova fund, which is a partner to Scottish Enterprise's co-investment fund.

Source: The Scotsman
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