International Petroleum Investment Company: A fresh start

IPIC has been on a journey to rebuild its business following the extraordinary downfall of Khadem al-Qubaisi, the company’s managing director who was made to step down in April 2015. In the months that followed, there was a major shakeup across all levels of the organisation including in the portfolio companies, with many of the roles previously held by al-Qubaisi reassigned to new officers. At the time, IPIC did not release any statements around al-Qubaisi’s dismissal, but in the months that followed, there was increasing newsflow in the media around alleged embezzlement of funds from business dealings between IPIC and 1MDB, a Malaysian sovereign wealth fund. Al-Qubaisi was arrested in August 2016.

OGInsights spoke with representatives of IPIC to find out more about the restructuring within IPIC. Suhail Mohammed Faraj Al Mazroui, the UAE energy minister, now heads IPIC with the group split into two divisions: Upstream and Downstream & Diversified.

The Upstream division is headed by Alyazia Ali Al Kuwaiti and includes the holdings in CEPSA, OMV and Oil Search.

Downstream & Diversified is headed by Saeed Mohamed Al Mehairbi  and includes the holdings in Nova Chemicals and Borealis and various business interests previously held by Aabar (including real estate and private jet businesses).

The IPIC team also act as source deals for Qatar Abu Dhabi Investment Company (“QADIC”), which is a joint Qatar and Abu Dhabi fund. The fund has a size of USD2 billion and aims to target investments with a link to IPIC’s downstream holdings. However, IPIC and QADIC will be cautious with making new investments given the recent tumult and will have plenty to focus on managing its existing portfolio.

In the upstream space IPIC will continue to look for acquisitions, which will be routed through CEPSA or OMV. IPIC aims to maintain a balanced portfolio with existing or near-term production / cash flow and keen to avoid heavy capex commitments. Africa remains a keen focus area (excluding Nigeria) as is Latin America, which will neatly complement the CEPSA portfolio.

In the downstream space, North American chemicals and fertiliser businesses are of interest. In Europe, only specialty chemicals are seen as a good fit (i.e. with Borealis).

Read More

Siccar Point is building up its business

OGInsights recently caught up with the Siccar Point team following its successful acquisition of the OMV North Sea business, which includes an 11.8% stake in the flagship Schiehallion oil field. Together with the acquisition of a stake in the Mariner field earlier this year, Siccar Point has now built up a North Sea business of relevant scale.

Siccar Point is a North Sea focussed E&P, with financial backing from Blackstone, Blue Water Energy and GIC. It was set up in 2014 and after extensive screening of the North Sea over the past two years, the team are pleased to have finally closed a couple of transactions – the team have looked at over 50 potentially acquisitions including, not surprisingly, the ConocoPhillips and Shell North Sea assets.

The minority, non-operated stake (8.9%) in Mariner was acquired from JX Nippon with expectations of first oil in 2018. However, it was clear that this was only a first step to building a bigger North Sea business, which a small stake in a single asset is not. In that regard, the OMV package came along at an opportune time.

Having looked at the Shell North Sea assets, Siccar Point and its owners/financiers believed it was best to pass on the opportunity. As well as being a large portfolio for someone the size of Siccar Point, the substantial number of gas assets and attempt to package in the stranded Corrib asset offshore Ireland, made it strategically less attractive. The decommissioning liability that would come along with the Shell portfolio was also challenging. The OMV portfolio, which came with a smaller number of long life assets was therefore much more desirable.

The financing of North Sea assets has been an ongoing challenge for vehicles such as Siccar Point which are backed by private equity money. The business model requires for acquisitions to be financed with substantial amounts of debt, and in most cases, the amount of debt that can be raised is based on the amount of reserves. However, the UK has a regulatory regime which requires operators to provide financial guarantees (generally in the form of letters of credit) for decommissioning liabilities – these are now coming to the forefront of attention given the maturity of the North Sea and imminent or near-term cessation of production across the basin. These guarantees consume much of the debt capacity and therefore require larger cash or “equity cheques” to be fronted by acquirers. Ultimately the OMV North Sea portfolio was one that worked well for Siccar Point in terms of size and ability to finance.

Read More