The New Business Department is one of the drivers of business growth. New Business handles the acquisition of new oil and gas interests and accompanies subsidiaries in the management of their asset portfolio.
Targeting external growth
The acquisition of new oil and gas fields opens new horizons, secures Perenco’s growth, helps renewing the Group's global reserves and brings new drivers. Whether in countries where Perenco already operates or in new entry countries, the evaluation process is managed in project mode across the board. We systematically bring together resources from Geosciences, Project, Drilling, Legal and Finance to refine assumptions (development plans, profitability and risk management), with the aim of assessing the fair value for Perenco.
Targets are selected if their development characteristics are in line with the Group technical strategy and if we identify operational synergies and growth prospects (known as “upsides”).
For example, the acquisition of onshore and offshore fields in Gabon in 2017, which produce 24,000 barrels per day and offer many synergies with our existing operations. Trinidad & Tobago is a new country entry. We have redeemed three mature offshore fields in shallow waters, which produce 13,000 bopd and provide a growth relay to the company in this region of the world, while staying in our technical comfort zone.
Optimising portfolio management and commercial contracts
Role of the department is also to advise and accompany our 14 subsidiaries' general managers on an individual basis to protect and extend our oil contracts. We operate during negotiation phases whenever our concessions are due to expire but also throughout the duration of contracts. Contracts generally have 20 to 30 years term with legal and economic stability clauses however the legislator may occasionally be tempted to renegotiate certain terms or even modify Oil or Gas Codes (changing the law). Amendment requests may also come from our initiative to allow for the sanction of a particular investment project in order to accelerate organic growth.
New business department intervenes on all major company projects as well, such as the FLNG project, result of a partnership between Perenco and the State of Cameroon for the production, processing and liquefaction of natural gas reserves. This had not been considered technically or economically viable in the past, but contractual arrangements and the "risk matrix" negotiation between all different projects components (upstream, midstream, downstream) were key in taking the decision to invest. Perenco chose to invest at the end of 2015 while industry was suffering a difficult downturn. However the quality of cooperation with the subsidiary and contractual boldness have made all the difference.
Exploiting our financial and decision-making agility
Perenco is the first independent European company with a daily production of 465,000 barrels in 2019. Its operational performance and cost-effectiveness are the key to his investment capacity. Given the capital structure, that of an independent family company, Perecno is investing in projects with relatively short cycles to minimise "pay-back" durations. This requires to be highly selective in the choice of the targets. The capital structure, the one of an independent family business, allows to have a very short decision-making process which gives a competitive advantage to quickly finalize negotiations with sellers.
The choice of acquisition targets and support provided to subsidiaries must be consistent with the company’s technical strategy. New business department is at a crossroad between acquisition projects and asset portfolio management, so that it can optimise missions while remaining as close as possible to Perenco’s value-generating, operational subsidiaries.
A successful "entry country"
In 2016, following the crisis, Perenco chose to invest and acquire three mature fields in shallow waters in Trinidad and Tobago. This acquisition marks Perenco’s entry into a new country. To start this new subsidiary with a transition period of only three months, the Group had to rally all operational teams and support departments (Project, Finance, Legal and IT, etc.), thereby enabling a very quick take-over without any production interruption. Starting a new field especially in a new subsidiary is always a thrilling moment that creates strong links between the teams and brings together the entire company.