Jon Fitzpatrick – Head of Natural Resources, EMEA, Macquarie Group – France
From London, UK, the head of natural resources for EMEA speaks to EBR about how fundamental oil and gas is to the Macquarie Group, a leading provider of financial, advisory, investment and funds management services.
Macquarie Group provides an extensive scope of services to the energy industry and particularly, to the oil and gas sector. Could you maybe run us through the integrated nature of your portfolio of services and how this constitutes one of your key comparative advantages?
Oil and gas is fundamental to Macquarie. We indeed provide a fully integrated service across the energy value chain, from exploration through to downstream and energy infrastructure, and across the entire capital spectrum. Our portfolio of activities comprises a wide range of capital advisory services, ranging from equity arranging for small cap exploration and production (E&P) companies, all the way through to being debt arranger to Freeport LNG, which was the largest non-recourse project financing in history in the USA.
We also handle the tough deals; for instance we recently announced London’s largest oil and gas equity placement to date in 2015. Through our M&A practice, Macquarie has advised on 178 publicly disclosed oil and gas M&A&D transactions since 2004, with a combined deal value of USD 52 billion, the second highest globally. I would also like to express that we enjoy thinking outside the box and executing innovative deals. For example, Macquarie recently completed the acquisition of Apache Australia’s upstream portfolio for USD 2.1 billion.
We are a major player in the energy trading business; we are the 3rd largest trader of physical gas in North America and supply 9 percent of the UK gas market. Regarding downstream, Macquarie is the fourth largest independent owner of bulk liquid storage globally. Furthermore, we have provided USD 4.5 billion of our capital to 150+ E&P clients.
We recognize that clients have a range of requirements and they are not necessarily aware of the divisional boundaries and “Chinese walls” within our firm. We pride ourselves in being able to solve client problems that span these boundaries. Our full product offering and global network of offices in
the world’s key energy hubs – Houston, Calgary, London and Singapore – surely constitute one of our main advantages.
All in all, Macquarie delivers a bulge bracket offering within the oil & gas and energy world, whilst also providing the flexibility, speed and innovation that would be expected from a boutique financial services and advisory firm. Our culture promotes innovation and entrepreneurial drive within a strong risk management framework. All our services are tailored to the client’s specific situation, keeping in mind that we don’t do standardization. We provide optimized solutions rather than pure banking products.
No other bank has such a global integrated offering while remaining commodity focused. We are not just bankers, we are experts in what we do simply because our advisors are experts and not pure bankers.
How does Macquarie Group draw on the experience built in a natural resources driven country, Australia, to first of all, build a solid capability and service, and secondly, to transfer those capabilities to the rest of the world, particularly the EMEA region that you head?
As an Australian company, natural resources are deeply rooted in our traditions. Australia’s proximity to Asia – the largest consumer of energy in the world – is a key strength to the country and companies like ours.
The oil and gas industry is however global; assets, headquarters and listing venues are very often in three or more different jurisdictions. Cross border M&A and other deals are not an exception, but almost the norm for the industry. It therefore wouldn’t be possible to serve our clients from just one location, hence why Macquarie has multiple offices around the world, particularly in the energy hubs mentioned earlier, and hence why we have built out resources teams in all key jurisdictions. We have implemented a web model rather than a hub one.
Macquarie also enjoys a 20 year track record in infrastructure asset management, and this is partly due to the fact Australia had led the way in privatizations for over 25 years. Generally speaking, Macquarie is a leader in the sectors we elect to be in – infrastructure or energy for instance.
Let’s move into the region you handle – EMEA. How significant is it today to the group’s global oil and gas business?
The EMEA region provides a broad mandate within the resources space. Areas such as the North Sea offer a baseload of demand for advisory and financial services. London is the pre-eminent listing venue for international oil & gas companies. Toronto is also one of the main listing venues, but it is generally more focused on domestic North American or smaller capitalized companies. Corporations with assets in Africa, South America, the Middle East and Asia all feature strongly on the London Stock Exchange (including AIM) and many also have headquarters here.
Our portfolio of clients is built according to where the need emanates from. We do not have a client mould and our clients include a Middle-Eastern government investment authority, a private continental European downstream company, an Aberdeen based services company, a South American E&P player, and dual-listed TSX/LSE E&P companies with assets from North Sea to Central Asia.
Looking into the assets you invest in, we see that the Macquarie Group invests in various type including gas distribution networks, wind farms and electric natural gas utilities. How do you choose which assets to invest in in this region, and how do you help companies raise capital?
Macquarie recognizes that while capital is homogeneous, users aren’t. Macquarie Capital is able to offer its balance sheet across the capital structure or advise companies on raising it externally. This is particularly the case in markets where it is challenging to raise capital; companies appreciate our ability to offer flexible solutions.
What are your personal views on the current change in market dynamics? Are we witnessing a New Energy Deal as some tend to say?
Oil price is stabilizing at a level where most plays continue to be profitable. There is however uneasiness that another shock could be coming and some capital markets are effectively closed, such as high yield debt for oil & gas companies. A number of increasingly important themes are emerging: shareholder activism is rising, there is a changing risk appetite whereby quick-low returns are preferred to high long-term returns, project complexity is being reduced to help assure investors and increase completion rates. There is also a focus on cash returns over capex.
How have these altered market conditions impacted Macquarie Bank Oil & Gas EMEA business?
Macquarie Capital’s broad product offering and flexibility have allowed an adjustment in our focus. Equity markets are very quiet at the moment, which has led us to focus on M&A, and A&D. Low corporate valuations and distressed balance sheets have given us the opportunity to assess more principal opportunities. Few transactions were being executed during the price decline in crude oil. However, now that buyer and seller valuations are becoming more aligned, we expect to reach closing more easily and quickly on transactions throughout the second half of 2015.
Europe is of course home to a plethora of leading players in the oil & gas business, whether operators or contractors. How does Macquarie, an Australian financial services firm by origin, create further awareness to its potential customers in such a competitive financial services landscape?
Our peers acknowledge that we have technically qualified experts, while have this entrepreneurial drive I mentioned. Our broad spectrum of services, our market leading position in the oil & gas business make us a partner of choice. Our scope extends beyond advisory. We might not have the brand visibility other companies enjoy, but we are known in the industry and recognized as a key player. Our business is expanding, and I am confident it will continue to do so in the future.
You are the President of the Scottish Oil Club. Could you share a few words on the role and actions taken by this Club?
The Edinburgh-based Scottish Oil Club is a non-profit energy NGO. We are not an industry body or association, but an industry-focused forum. We bring together all types of profiles of people and organizations, and our membership includes decision/policy makers, financial sector analysts, academics and consultants – a true breadth of experience and knowledge. The Club is a highly credible energy discussion forum and we can be compared to a think-tank. In my seven year tenure on the board (two as as president), many distinguished guests have addressed our panels, for example during the last annual dinner in March, Andrew Mackenzie, the CEO of BHP Billiton, was our principal guest speaker, alongside Alistair Campbell. Other key speakers have included the CEOs of Shell, Wood Group, Wood Mackenzie and others.