Mergers and acquisitions activity within the global oil and gas market
O&G Deals 2007 reviews M&A activity in the oil and gas industry. We examine both the rationale behind the overall trends and look at the key individual deals.
Deal activity in the oil & gas industry was characterised by a wide diversity of forces in 2007. M&A opportunities for the majors remained limited. Activity by the national oil companies (NOCs) was also relatively subdued. The unique circumstances of Russian energy industry restructuring produced a flow of transactions. Private equity assumed a very high profile and was a major driver of O&G deals. Oilfield service consolidation accelerated sharply leading to a huge increase in service deal value. International transactions replaced North American and European deals in the multi-billion dollar stakes.
We look both at the year under review and ahead to the future direction of deal-making in the sector.
We also highlight, in a series of dialogue panels throughout the report, some of the critical issues for companies engaging in deal activity within the sector. Drawing on our global experience as an adviser to oil and gas M&A players, our commentary addresses all key markets in the sector.
Looking ahead, we examine the effect of the ‘credit crunch’ and a more uncertain economic outlook on deal-making in the sector. We look at the imperatives that will continue to underpin activity as well as the factors that will inhibit deal-making.
Report highlights
M&A momentum stays level
Deal activity in the sector remains at the level achieved in 2006. Total deal value edged up slightly – from US$291.1bn to US$292.2bn. In contrast, the 2006 total had risen 16% from the previous year. The volume in 2007 was sustained despite a relative lull in the overseas investment activity by the Russian, Chinese and Indian NOCs that had been part of the 2006 increase. Big international moves, in the downstream and the service sector, were key to keeping overall deal totals up. International activity in these two sectors accounted for 23% of total O&G deal value, up from just 4% in 2006.
Big leap in service sector deals
Activity in the oil field services sector intensified with a 165% increase in the total value of deals to US$67.3bn in 2007. The big leap in the total value continues the trend of 2006 when it rose 132%, to US$25.4bn from US$10.9bn in 2005. The share of service sector M&A in total O&G deals has increased from 4% in 2005, through 9% in 2006, to 23% in 2007. The average value of individual deals in the sector nearly tripled from US$162 million in 2006 to US$451 million in 2007.
High profile for private equity
Private equity investors were major O&G players in 2007. Remarkably, three of the top ten O&G deals involved private equity buyers. Private equity investment was also a notable feature in the midstream and service sectors. The extent of private equity investment in the top fifty deals is something that has not been seen in the sector in recent years.
Oil sands and coalbed methane remain key upstream targets
In a high oil price environment, and with limited availability of major conventional upstream opportunities, more unconventional oil and gas assets, situated in stable locations close to end markets, continued to attract buyers. There were 20 deals involving Canadian oil sand targets and 18 for coalbed methane in Canada, the US and Australia, compared with 17 and 21 respectively in 2006.
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