In September, natural gas prices soared, with European gas prices reaching an all-time high as demand driven by the energy transition continues to significantly outpace supply.
This is expected to increase further as demand is expected to exceed pre-covid levels by 7% by 2024. Natural gas will continue to be the transitional fuel for the near future, but producers are limiting investments in new supplies and few other short-term alternatives. , the requirement for cleaner energy resources is at an all time high to help meet environmental goals. Ahead of COP26, Piper Sandler summarizes the emerging themes of mergers and acquisitions (M&A) of the energy transition.
From the UKCS perspective, the macro picture is positive. The number of emerging operators entering the region continues to increase, with substantial capital being allocated to projects within the UKCS. Supported by a well-understood regulatory regime and existing infrastructure, UKCS is poised to become a leading global integrated clean energy hub. This is also supported by the UK government’s major commitment to building a hydrogen economy and establishing a strong competitive position globally. As a result of these factors, UKCS has established itself as a highly respected basin from a global perspective, highlighted by significant ongoing activity in the renewable energy sector and an expectation that this will continue to grow. ‘accelerate in the short term.
In the mergers and acquisitions sector, oil service providers (OFS) continue to make great strides in the energy transition space, with many players announcing important strategic moves to position themselves in new markets. This has effectively generated a new “category of transactions” within the energy industry, where transactions related to the energy transition can be specifically mapped within the OFS sector.
However, this is not a “one size fits all” strategy, which is why OFS suppliers continue to design different strategies to participate in the energy transition that highlight their strengths. This is evident in the offshore wind industry, where many offshore installation service providers have effectively transitioned and moved their services into this high growth industry. These newly formed energy service providers will play a pivotal role in providing the technology and services necessary to achieve the Net Zero goals, while significantly reducing the cost bases in the oil and gas and renewable energy sectors. With the scale, management expertise, financial resources and global footprint that OFS providers can utilize, many will be successful in making this transition.
Piper Sandler continues to see a more diverse customer base and transaction base, with exposure to the entire energy sector. Energy transition, decarbonization, technology and diversification have all become key themes in recent deals, with multiple pending deals sharing similar goals. Piper Sandler remains committed to the global energy industry and continues to stay at the forefront of industry trends, drivers and developments.
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