Economic Report 2017

 Figure 33: Total Working Interest Production by Company

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Top 10 UKCS Producing Companies

All Other UKCS Producing Companies

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Source:WoodMackenzie,Oil&GasUK

In 2007, of 61 companies active in the basin, the biggest 10 producers owned 68 per cent of production

In 2017, of 68 companies active in the basin, the biggest 10 producers owned 58 per cent of production

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There are a numďer oĨ reasons ďehind the uƉturn in D&A actiǀity seen so Ĩar this year͘ Wrimarily, the ǀaluation gaƉ ďetǁeen Ɖotential ďuyers and sellers has closed, enaďling deals to haƉƉen͘ Although uncertainty oǀer the oil Ɖrice still edžists, the marŬet aƉƉears clearer than it has ďeen oǀer the last couƉle oĨ years͘ &urthermore, comƉanies haǀe ďeen ǁilling to Ɖut more Ĩledžiďle deal structures in Ɖlace, mitigating doǁnside risŬ Ĩor ďuyers and creating uƉside Ɖotential Ĩor sellers͘ A tyƉical edžamƉle oĨ this ǁould ďe a contingency Ɖayment ǁritten into the deal, only Ɖayaďle ďy the ďuyer iĨ a certain oil Ɖrice or Ɖroũect milestone is reached͘ ecommissioning liaďilities haǀe also ďeen tacŬled using comƉledž structures, and this ǁill Ɖlay an increasing role ǁithin Ĩuture D&A deals as the UK ^ cont inue s t o m at ur e . A n e x p e r t t ax p ane l w ill adv ise gov e r nm e nt on h ow t h is could b e st b e de alt w it h t h r ough the tadž system rather than through comƉledž and timeͲconsuming commercial agreements ;see section ϲ͘ϰ on Ĩiscal ƉolicyͿ͘ &urther uƉstream D&A actiǀity is edžƉected oǀer the remainder oĨ this year and into 201ϴ͘ Daũor oƉerators are like ly t o t ake st r at e gic acq uisit ions t o r e sh ap e t h e ir p or t folios and t o div e st non- cor e asse t s. T h is w ill offe r fr e sh p r osp e ct s for gr ow t h t o sm alle r com p anie s looking t o cap it alise on m ar ke t op p or t unit ie s. T h e acq uisit ion of infr ast r uct ur e int e r e st s b y infr ast r uct ur e funds and ot h e r ne w b uy e r s h as also cont inue d ov e r the last year͘ &or edžamƉle, Ancala͛s ϯ0͘2ϴ Ɖer cent acƋuisition oĨ the ^cottish Area Gas ǀacuation ^ystem and ϲ0͘ϱϲ Ɖer cent interest in the eryl ƉiƉeline Ĩrom AƉache is ũust one edžamƉle oĨ the transition Ĩrom historically op e r at or - ow ne d infr ast r uct ur e t o m id- st r e am conce nt r at e d com p anie s. LargeͲscale mergers and acƋuisitions haǀe not ďeen limited to the uƉstream ďusiness, ǁith a numďer oĨ oilĨield serǀice comƉanies announcing deals oǀer the last 1ϴ months͘ Again, the tyƉe oĨ deal has ǀaried͘ ^ome comƉanies haǀe ďeen acƋuired aĨter struggling to adũust to the current Ɖrice enǀironment͘ Other deals haǀe ďeen driǀen ďy the desire to ǀertically integrate to oĨĨer a ǁider ͚oneͲstoƉͲshoƉ͛ solution͘ ^ome mergers haǀe ďeen incentiǀised b y t h e sy ne r gie s offe r e d b y consolidat ing t w o b usine sse s int o one . One com m on t h e m e for m ost de als is t h at t h e ne w e nt it y is ab le t o offe r m or e innov at iv e solut ions at a low e r cost w it h im p r ov e d e x e cut ion; t h is is cr it ical t o t h e fut ur e of t h e UKC S.

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