A PROMINENT North Sea dealmaker has declared that confidence has returned to the north-east economy, countering the perception that the oil and gas industry remains stuck in the doldrums.
Tom Faichnie, managing director of Hall Morrice Corporate Finance, said investors are in the mood to do deals again in the north-east after the protracted downturn sparked by the plunge in oil prices in late 2014. His firm has recently brokered a major private equity investment in Aberdeen-based Motive Offshore, which specialises in marine rental equipment for the oil and gas sector.
Mr Faichnie set up Hall Morrice in April 2017 after a 20-year career as a corporate financier for a range of high-profile banks and accountancy firms, including Deloitte, Barclays, Campbell Dallas and, most recently, RSM UK.
He admits that two years ago there were “sharp intakes of breath” as firms pulled out of Aberdeen. But he could see signs that the downturn was beginning to bottom out when he began to work closely with the firm’s new clients.
Mr Faichnie, who said his firm prefers to take a longer term approach than other corporate finance houses, noted: “We could always see that everything had actually hit the bottom.
“One company after another was starting to tick back up again. In the last year, exactly the same has [happened] and we see them all coming back.”
He added that while the recovery is not yet obvious in firms’ published statutory accounts, management accounts are showing that levels of profitability and revenue rebounded in 2018 to levels seen in 2014. “We are not just talking one or two, it is consistently across the board,” he said. “But nobody is going to see that for another nine months, I guess, until the accounts come out.”
Asked why the market has recovered, Mr Faichnie said the revival of the oil price has restored confidence. That has led to major oil and gas exporters to develop new technology, which is the kind of work that many firms in the north-east engage in.
However, Mr Faichnie admits that many of the clients Hall Morrice works with are almost the “last man standing”, given the extent to which the downturn ripped through the sector.
Many firms went out of business, while others merged. Mr Faichnie said: “The door is a lot more open to get the contracts.”
He said there is a misconception the oil and gas services sector in Aberdeen only supports the North Sea. Mr Faichnie said: “In reality, Aberdeen is supporting the whole global oil and gas industry.
“Yes, there may be a head office in Aberdeen, and maybe all their work is done in Aberdeen, but actually, as soon as the equipment goes out the door, it is going to the Caspian or Australia or the US.
“When you drill down into it, there is not that much in the North Sea.
“But I would say that a lot of maintenance market in the North Sea is still quite depressed. It is still not coming back, but it has got to. Oil and gas is cyclical, and I think we all know that.”
Mr Faichnie highlighted the work his firm recently did on securing private equity investment for Motive, which had struggled on the back of the 2014 downturn given the capital demands it faced in bringing new products to market. Its owners had mulled putting the business up for sale after overseeing its recovery following the downturn, but were convinced to pursue a different route.
Mr Faichnie said the deal, which came as Motive was opening up new markets in areas such as the US and the Middle East, had resulted in the owners “de-risking themselves” while simultaneously getting the backing of a fund focused on the energy sector. The Norwegian fund, Energy Venture, acquired a stake in Motive in March for an undisclosed sum. As a result, Motive has a £30 million “war chest” for acquisitions, product development and moves into new markets. The founders of the firm have retained the “golden share” in the business.
Mr Faichnie said the deal shows that investors are willing to invest in Aberdeen again. He said: “We may be a local private equity house, but our view is that it is a good time. It maybe still not look like it has hit rock bottom because people are looking at statutory accounts, but actually the businesses are really coming back. Once the 2018 accounts are out by the middle of next year, people will see most people did quite well last year.”
Mr Faichnie will this week attend the Offshore Technology Conference in Houston, which he said has been crucial for developing business links over recent years.
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