Genel Energy chief Tony Hayward revives plan for distressed oil companies fund

Tony Hayward has revived plans to start an investment fund aimed at buying distressed oil assets.

The chairman of Genel Energy, which is focused primarily on the Kurdish region of Iraq, is best known as the former chief of BP who was in charge at the time of the company’s worst-ever crisis – the 2010 Macondo disaster in the Gulf of Mexico. He is also non-executive chairman of the commodities trader Glencore.

Mr Hayward on Monday declined to comment on reports that he has been lobbying pot­ential investors for the fund, but he previously has made unsuccessful attempts to raise money for a similar fund.

The Sunday Times in London, among others, reported that Mr Hayward has been lobbying Arabian Gulf sovereign wealth funds and other potential investors to raise money for the fund. The collapse in oil prices since the summer of 2014 has led to a number of funds being set up looking to scoop up distressed industry assets at bargain prices.

Among them, Wilbur Ross, the “Bottom Feeder King”, as he has been dubbed by New York magazine, was one of the earliest to begin investing early last year.

On Sunday, he announced that he would pay US$1.6 billion to buy Nexeo, a supplier to the oil and chemicals industries, from private equity company TPG, which earlier had bought it for $1bn from oil and chemicals com­pany Ashland.

Others to have launched distressed energy funds include Blackstone, Apollo Global Management and Neptune Oil and Gas, a firm set up by the former Centrica chief executive Sam Laidlaw. Their strategies range from straightforward bets on equity prices, acquiring distressed-priced bonds issued by energy companies to direct purchases of oil and gas-producing assets or the companies that own them.

Last summer, Mr Hayward and a number of other bankers and industry executives attempted to launch such a fund, but that was abandoned in September after investors in their investment vehicle – LMS Capital – blocked their efforts.

Mr Hayward, together with his original Genel Energy investors and former Weatherford International chairman Bernard Duroc-Danner, had attempted to turn the £115 million (Dh607.9m) investment trust LMS into a £250m distressed industry fund.

But existing investors objected not only to the strategy but to the hedge fund-style fees that had been proposed, whereby the managers charge 2 per cent of the assets plus 20 per cent of any gains in value.

The latest move comes after Mr Hayward and other Genel Energy executives missed out on bonus payments because the company failed to reach share price targets.

Genel Energy’s shares have declined by 92 per cent from their highs in early 2014, driven by both the collapse in oil prices worldwide as well as the war and financial woes that have bedevilled the Kurdish region.

The shares have recovered by about 18 per cent since their record low at the end February as the Kurdistan Regional Government has moved to stabilise payments for major foreign oper­ators there as well as a bond buyback programme by the company.

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