More than any other region in the world, the North Sea has suffered greatly over the past two years as a 60% drop in oil prices, high operating costs, dwindling reserves and a tough tax regime has hit operators hard.
As a result, producers ranging from Shell and France's Total SA (NYSE: TOT) to smaller regional players such as Enquest Plc and Tullow Oil Plc have put dozens of assets in the region on the block to boost their balance sheets.
But deals have been few and far apart. Buyers and sellers have found it hard to agree on the value of assets and how to share the costs of dismantling and cleaning up of obsolete fields, known as decommissioning.
With around 30% of fields operating at a loss in 2016 and others seeing razor thin margins, "almost all U.K. North Sea assets are up for sale," said Fiona Legate, senior U.K. upstream oil and gas analyst at consultancy WoodMackenzie.
"There is however a limited pool of buyers," she added.
BP has struggled to sell a stake in its Forties pipeline system, one of the region's oldest and the main source for the eponymous crude used to price the global Brent crude benchmark.
Talks with Swiss-based chemical giant Ineos recently collapsed after the sides could not agree on how to price the asset, sources close to the negotiations said.
The Forties pipeline has a capacity to deliver over 1 million barrels per day and serves over 50 offshore oil and gas fields in the central North Sea, according to BP's website.
But declining output has meant the pipeline operated at less than 40% of its capacity last year, WoodMackenzie says.
Ineos wanted BP and other producers using the pipeline to commit to a fixed capacity fee that would guarantee revenue even if output continued to decline, industry sources close to the talks told Reuters.
BP however sought to pay on a per-barrel basis, they said.
"Buyers want something to protect them against a drop in throughput," one source said.
The pipeline system remains on the market.
BP and Ineos declined to comment.
The U.K. North Sea was a trailblazer for the unlocking of new oil and gas resources deep under the sea. But since hitting peak production in the late 1990s, it has been in steady decline.
Shell is starting an ambitious three-year $30 billion global asset sale program to pay for its $54 billion acquisition of smaller British rival BG Group in February.
In the North Sea, the company is planning to bundle several assets in packages that will include mature fields along with more attractive assets such as the Buzzard Field and pipelines, banking sources said.
Bank of America Merrill Lynch will run the North Sea asset sales, banking sources said.
The Anglo-Dutch company held talks in recent months with Neptune, a North Sea-focused investment company headed by former Centrica boss Sam Laidlow and backed by private equity funds Caryle Group and CVC Partners.
Shell, Carlyle and Bank of America declined to comment.
Shell CFO Simon Henry remains confident it can meet its target within around three years. Shell will focus at first on selling infrastructure, refining and retail businesses that are less exposed to oil price fluctuations over production, or upstream assets, he said.
"If the oil price stays at $48 a barrel maybe [the sale program] will take us a little bit longer. We are not chasing sales of upstream assets at $48."
Operating in the North Sea remains challenging even after Shell cut costs sharply in recent years, Henry said, adding that within the region, some areas are more profitable than others.
"We've taken our costs down hugely and improved our reliability and availability. So the performance today is much better than it was two years ago but it is still not good," Henry told reporters on May 24.
"In general it is high cost region in which you have to keep spending to stay in business and have significant decommissioning and restoration costs."
An extended period of low oil prices also leads to an earlier decommissioning of fields, he said.
WoodMackenzie estimates 142 fields will cease production over the next five years. Total U.K. North Sea decommissioning are expected to reach 55 billion pounds.
"It is a vicious circle with the low oil price," Henry said.
M&A activity has not stopped completely and is focusing mostly on consolidating existing positions, Legate said.
The recent recovery in oil prices to around $50 a barrel was nevertheless expected to revive M&A activity in the second half of the year, she added.
BP last month doubled its interest in the Culzean gas field development to 32% after buying a stake from JX Nippon.
Shell and ExxonMobil (NYSE: XOM) last year sold a small cluster of fields, including the Anasuria Floating Production Storage and Offloading unit, to two Malaysian firms.
Mezzanine financing usually remains a reliable standby when the broader capital markets are swinging shut.
While the lower middle market might be underserved, capital is still available for smaller, regional operators with good opportunities.
With deal volume down, investors sidelined and volatility all about, getting deals across the finish line is getting harder and harder.