Lux: nearly $7B in private investment in emerging oil gas EP technologies over last decade

8 December 2014

Investment into emerging oil and gas EP (exploration and production) technologies, which were nearly non-existent in 2003, at just $57 million, have attracted nearly $7 billion in private investment from 497 unique transactions, according to a new report from Lux Research, “Investing in Next Generation Oil and Gas Technologies”.

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In the peak (by dollars) year of 2011, $866 million went to a single startup, Laricina Energy, and its process involving solvent-cyclic steam assisted gravity drainage (SC-SAGD) to boost production of bitumen from Canada’s oil sands. The number of transactions has continued to rise, reaching a record of 77 unique transactions in 2013. Click to enlarge.

North American start-ups have attracted 76% of transactions (377) and 87% of investment dollars ($6 billion) since 2003 due to the booming heavy oil and tight oil/shale gas market. European companies have also raised significant funding, with $770 million from 107 transactions, Lux found. The evolving deepwater sector, primarily driven by North Sea assets, has driven investment into Europe’s oil and gas start-up community; Norway, accounts for about 55% of Europe’s investment activity.

The most common exit strategy for technology developers is acquisition by oilfield services companies, Lux said. There have been 136 acquisitions between 2003 and 2013. Schlumberger is the most prolific buyer, acquiring 56 EP technology developers since 2003. Private equity firms have also purchased technology companies, but with the end goal of turning them around to sell to an oilfield services company.

Acquisitions are likely to slow, Lux said, due oilfield services struggling to grow their EBITDA since 2011, weak natural gas prices, weak oil prices, increasing competition and a shorter drilling season due to weather in North America.