Oil and Gas Industry M&A Deals Reach $141B

13 October, 2014

Deloitte’s mergers and acquisitions specialists just released a report on what’s driving activity in the oil and gas industry, which suggests the deal market may be poised for a rebound.

Oil & Gas Industry Trends & ChallengesA total of 299 transactions were completed in the first six months of 2014, one less than in the same period a year earlier. At the same time, the total value of deals in the first half of 2014 rose by nearly $40 billion globally to $141 billion from $102 billion in the first half of 2013.

The United States and Canada accounted for 61 percent of all deal activity, though this percentage slipped slightly from the first half of 2013. In the first half of the year, both Asia and South America saw increases in their share of the deal count rising nearly 20 percent and 50 percent, respectively.

The report also shows that the first half of 2014 saw a continuation of many of the trends present in 2013, such as the development of existing resources rather than the acquisition of new ones. Companies are now focused on cost containment and organic growth, particularly in the upstream sector, where producers are looking to ensure they have the right mix of properties in their portfolio.

The report covers deals from the past six months by industry sector. Highlights for each sector include:

  • North American shale plays continue to dominate the deal market in the exploration and production (E&P) sector.
  • The oilfield services sector saw an increase in deal value, thanks in part to three large deals, and margin pressure from the E&P sector may drive additional consolidation among middle market players.
  • There has been a dramatic slowdown in deal activity in the midstream sector during 2014 after a flurry of transactions in 2012 and 2013.
  • Robust deal activity is occurring in the refining and marketing sector driven by an increase in retail transactions.

Kenneth McKellar, partner in charge of the energy and resources industry at Deloitte Middle East, stated, “Largely because of geopolitical unrest that has curtailed production from Libya, Iraq, and Iran, commodity prices have remained relatively high for the first half of the year, and expectations for continued upward pressure on prices for the remainder of the year may make producers less likely to part with assets. Meanwhile, natural gas prices have remained stable, and the potential for increased demand from US exports of liquefied natural gas (LNG) may draw some new buyers to the market as they look to increase their exposure to gas.”

Humphry Hatton, CEO of Deloitte Corporate Finance Ltd. added, “The uptick in deal activity in June of this year could signify a stronger deal market in the second half of the year. Upward pressure on commodity prices is likely to drive more transactions, and private equity investors, in particular, are likely to continue to show interest and be a source of capital.”

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