Shifting Sands - The future of the oil industry

Case study: Salamander Energy

Salamander Energy is an independent E&P business focused on South East Asia.



Founded in early 2005, Salamander was conceived and developed by three oil industry professionals who already had considerable experience of working in East/South East Asia: CEO James Menzies, CFO Nick Cooper and Business Development Director Andrew Cochran. The company is chaired by Charles Jamieson, former CEO of Premier Oil.

The catalyst for setting up Salamander was the opportunity that others were largely ignoring. “We felt that South East Asia had become unfashionable. It was not where the oil and gas herd were going even though its geological basins are every bit as prolific as the Gulf of Mexico or North Sea,” says Menzies.

“Look at the production history: basins here have been producing for the past 40 years, with strong growth until four years ago, since when production has flattened while demand goes on rising.”

Menzies says this represents a classic tipping point, where majors tend to lose interest or switch focus, leaving much of the way clear for independents – and for private equity investment. “While there are local independents, especially in Indonesia, they tend to be family-owned or E&P spin-offs from larger conglomerates. We felt there was a gap,” he says.

Menzies, Cooper and Cochran were determined to raise capital and capture assets to build their own E&P company, but one that would have as its foundation, oil and gas fields capable of generating immediate cash flow, so enabling a considered approach to future acquisitions. “We wanted to generate early cash flow so we could use the majority of the funding to purchase additional assets,” explains Menzies.



It was a strategy that fitted with 3i’s Oil, Gas and Power team, by then looking to expand its already successful Asia portfolio. And the timing was right. The Salamander trio needed to raise about $50m to get the business up and running. Of the funds initially raised, 3i invested $11m.

Mike Sibson, 3i Director, said at the time: “The Salamander team has a unique mix of skills in oil and gas, M&A, and South East Asia coupled with tremendous drive and energy. This combination leaves them well positioned to take advantage of the market opportunity in Asia.”

Menzies agrees: “When we first started, we found the right deal with Endeavour, who was a willing seller of what qualified as a good quality gas asset that was being appraised and development being considered. We’ve now closed on six deals, including three in Thailand, as well as production agreements in Indonesia.” Securing this basket of assets meant that Salamander had to raise a further $75m of equity. 3i has provided an additional $11m as part of this.



Menzies is in no doubt that engaging with 3i was the right decision and that its Oil, Gas and Power team has brought more than just money to the table. “They’ve been very supportive,” he says. “3i has a strong presence in Asia and realises we have the ambition to grow on a meaningful scale. It was obvious they have a lot of connections in the oil and gas world.”

Previous section