UK's Parkmead builds war chest

OREANDA-NEWS. London-listed upstream independent Parkmead has raised \$21.1mn for potential acquisitions.

The firm has raised the cash by issuing new shares.

"The proceeds of the placing will be employed to give the company greater flexibility to take advantage of the current mergers and acquisition (M&A) environment in the oil and gas sector," it said today. Parkmead "is aware of a number of potential opportunities that will complement the company's existing portfolio of assets" in the UK North Sea and the Netherlands, it said.

The firm is likely to focus its search on the North Sea, where a variety of sellers have emerged since oil prices started falling last year. Large companies, such as Total, are reviewing their portfolios in the region as part of a drive to cut costs and focus investment on higher-margin basins. And smaller companies with high debt-to-equity ratios are becoming increasingly vulnerable to takeover approaches as they struggle to service debt repayments and raise funds for licence requirements.

"A number of companies are finding themselves in a distressed situation given capital structures that are not suited to the current oil price environment," Parkmead said.

Deal-making in the North Sea was sluggish in the first quarter, with the sharp decline in oil prices widening the gap between buyers' and sellers' valuations. But a recent improvement in oil prices may close the gap and pave the way for an increase in M&A activity in the second half of the year.

Parkmead is keen to position itself as a predator rather than prey in the current environment. The firm's share price has dropped since last year but it has kept a strong balance sheet. The company held \$61.5mn of cash at the end of last year.

Parkmead has embarked on an acquisition-led growth strategy since entrepreneur Tom Cross repositioned the business as an oil and gas independent in 2011. It was previously an investment and advisory firm. Parkmead has made six acquisitions in that time — including stakes in the Platypus gas discovery and the producing Athena oil field in the UK North Sea.