UK-based newcomer Boru Energy is hoping to secure its first transaction within a year as it targets assets in West Africa, possibly looking for an offshore position for its maiden deal.
The private equity-backed player, which last month was unveiled by the Carlyle Group as the newest oil and gas addition to its stable, is willing to enter into deals worth up to $1 billion – potentially along with partners – and is looking to start off as a non-operator.
“We are right now looking for producing assets, in West Africa,” chief executive Pat Hickey told Upstream on the sidelines of the Africa Oil Week conference in Cape Town on Thursday.
“Ideally oil (and) a slight preference for offshore, but it doesn’t absolutely have to be offshore.”
Hickey, who has previously worked for Tullow Oil and, along with former Tullow founder and chief executive Aidan Heavey, is one of four employees at Boru, said the company’s core area of interest is from Senegal down to Angola.
Boru is already in talks with potential counterparties, but no deals are imminent.
“We would like to think that we would get something done within the next 12 months, and certainly there should be enough inventory of opportunity to do that. But we want to do it right, not quickly,” he said.
“In the first instance, we will focus on non-operated positions, simply because we don’t want to build a big operating overhead that is chewing up equity before it is allocated, but also we want to be able to pick and choose and work with a number of operators and potential partners to do transactions,” Hickey said on a panel on the mergers and acquisitions market in Africa at the Cape Town event.
“So, we could team up with a conventional operator on one transaction, perhaps with another private equity operator on another transaction and actually be able to deploy the capital to the right assets with the right partners.”
Carlyle International Energy Partners (CIEP) will provide funding for any acquisitions, with parent Carlyle Group saying in October Boru will target acquisitions of up to $1 billion in total. Hickey clarified that this kitty is exclusive of debt.
“If we want to get the most value out of Carlyle’s balance sheet, our own networks and the opportunities that are out there, and also to have fewer competitors, I think we need to be looking at slightly larger transactions – not the $100 million, $200 million, $300 million deals; it will be $500 million-plus, and maybe even up to $1 billion. Those are the sorts of transactions that we want to be able to do.”
This could mean teaming up with other public or privately funded players on deals.
“Part of our model could be, if we work with an operator and there is a $1 billion deal and they have $500 million of capacity or ambition, and we do the other part of it.”
As for where such large potential deals are likely to originate, Hickey added: “In reality, if you are going to go for the bigger transactions, there are fewer of those – there are probably 20, 30 or 40 of those - and quite a few of them are in places like Nigeria and Angola, so obviously we will be looking there.”
Onshore Nigeria, however, appears to be off the radar for any maiden splash.
“Most of the production with significant remaining life in Africa is offshore. There are potential new projects in Niger, there is stuff in Chad with lots of upside, there is also Gabon like what Assala Energy [also part of the Carlyle stable] have – there are not a lot of other onshore producing assets of that scale,” Hickey said.
“In the first instance, we would be very cautious of doing Nigeria onshore – it is just not for us as a first transaction.
“It is more likely that we will be offshore to start with.”
Hickey was at one stage chief financial officer at Tullow, quitting in 2008. He then joined Irish independent Petroceltic International in late 2010, initially as corporate development director before moving on to become chief financial officer.
Carlyle has a vast stable of oil and gas investments.
Apart from Assala, which recently acquired the assets of Shell in Gabon, these include North Sea-focused Neptune Energy, US giant Chesapeake Energy, US midstream giant Kinder Morgan.