The FINANCIAL — Oil and gas M&A activity was significantly lower in 2013 in value and volume according to EY’s Global oil and gas transactions review. The impact of supply side trends on restricting activity are also likely to continue over the next 12 months.
The review highlights there was a 21% decline in M&A value to US$337b, significantly lower than the record high of US$423b in 2012. The total number of oil and gas transactions, was also down sharply in 2013 — dropping from just over 1,800 transactions in 2012 to just under 1,400 transactions in 2013 — a decline of 23%.
In 2013, there was a reduced willingness to commit to larger transactions, according to EY. In 2012, 98 oil and gas transactions exceeded US$1b in value, compared with just 70 in 2013. In 2012, there were four “megadeals” with reported values over US$10b, but in 2013, there were only three such deals. In 2012, the combined value of all deals larger than US$1b topped US$309b, while in 2013, deals US$1 billion or greater totaled only US$241b, according to EY.
Normal M&A drivers of portfolio and capital optimization helped upstream remain the most active segment, with US$237b in announced transaction value from 1,009 deals in 2013, accounting for about 70% of the global totals of both value and number of deals. North America continued to be the dominant region for upstream activity, generating approximately 30% of upstream transaction value and about 53% of the global deal volume. Nonetheless, this was a slight decline in the region’s relative importance, with upstream deal activity in the US dropping as shale gas activity declined, largely a victim of its own success in previous years.
Transaction values and deal volumes in the downstream segment were down sharply in 2013, with reported deal values totaling only about US$14b and only 109 deals. In comparison, segment values totaled US$47b in 2012, with almost 200 deals. Ownership change in retail and refining in mature markets continued, stemming from ongoing portfolio rebalance and capital allocation reviews. Growing oil demand and refining capacity, particularly in Asian markets, supported a brighter picture for other markets, albeit with relatively low transaction levels.
In contrast to the other segments, activity strengthened in the midstream segment in 2013, with reported deal values rising to more than US$70b (compared with US$60b in 2012, but well below the US$88b seen in 2011), although the number of deals declined from 104 in 2012 to 90 in 2013. With its vibrant and tax-advantaged Master Limited Partnership (MLP) sub-segment that relies on acquisition activity to grow, North America accounted for about 71% of all midstream transaction activity and reported deal values.
After a strong year in 2012, activity in the oilfield services (OFS) segment struggled in 2013, with reported deal values declining by almost 50% to about US$15b, and the number of deals falling by almost 25% to 185. While activity relating to onshore and unconventional suppliers remained muted, driven by the tough operating environment in those parts of the industry, service companies supplying the offshore sector remained in demand, according to EY.
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