A recent report by Business Consultants Ernst and Young indicate that Private equity (PE) firms are preparing to invest in global oil and gas sector despite the recent slump in prices.

The firm through a survey on about 100 PE firms observed that about 25 per cent of the PE firms are planning acquisitions before the end of the year, with 43 per cent of them by the first half of 2017.

The report indicates that $971.4 billion of PE cash reserves, technically called dry powder, was available to be deployed from last month.

“Much of the global PE dry powder is yet to be deployed  having grown $971.4 billion in June…” the report reads in part.

With restrained financing environment for oil and gas companies, from traditional sources particularly in the mid-size range, PE funds are looking to make inroads into the sector the report indicated.

But what opportunities are available and when and how should PE tackle an increasingly complex and stressed industry?

The report notes that about 64 per cent of the PE investors are being driven to invest in the oil and gas sector due to low oil prices, while 44 per cent are driven by drought in the traditional sources of funding.

“Access to financing is arguably the biggest challenge facing oil and gas companies. While many expected PE funds to swoop in with capital during the oil price downturn over the last 18 months, investment has fallen short,” EY Africa energy lead consultant Claire Lawrie said.

Overall, about 80 per cent of survey respondents expect deal-making in Africa to increase with investors being attracted by the construction of new infrastructure, opening up of new trade routes, enhancing regional integration and stronger regulatory systems in East Africa.

See Report

Capitalizing on Opportunities: Private Equity Investment in the Oil and gas sector