More M&A deals ahead, report predicts
Offshore staff
EDINBURGH, UK -- Wood Mackenzie forecasts another busy year for global upstream M&A activity, following a surge of deals in 2010.
The analysts identified total spending in this sector last year of $183 billion, which they attribute to four prevailing trends: unconventional oil and gas; weak US gas prices; restructuring by international oil companies (IOCs); and aggressive spending by Asian national oil companies (NOCs).
Emerging influences this year will be tight oil plays and likely restructuring in the Gulf of Mexico post-Macondo, the analysts add.
Last year, Asian NOCs were very active in international deals. Wood Mackenzie points out that the Chinese NOCs, the Korean National Oil Co. and Thailand’s PTTEP invested a total of $35 billion in overseas acquisitions.
This pushed total NOC cross-border spending as a proportion of global M&A to 19%, marking 2010 the sixth successive year in which NOCs increased their share of the market. The NOCs also outspent the majors by $16 billion.
Luke Parker, lead analyst for Wood Mackenzie’s M&A Service, said: “This peer group is focused on long-life resource capture – hence the attraction of LNG, deepwater, unconventional gas, and heavy oil - so we can expect more non-operated stakes, aggressive buying overseas, and potentially some big-ticket acquisitions in 2011.
“2010 was a liquid market which saw annual asset deal expenditure reach a new high at $117 billion, underpinned by a round of portfolio restructuring across the sector,” says Parker. “BP, ConocoPhillips, Devon, and Chesapeake were high profile sellers who between them sold $45 billion of assets in 2010; $5 billion more than the total market for assets in 2009.”
As for the major IOCs, Chevron, Shell, and Total returned to the acquisition trail, while Statoil and ConocoPhillips were notable sellers. Among the Large Cap companies, Apache and Occidental were buyers, while Cairn, Devon, Chesapeake, Repsol YPF, and Suncor accounted for a total of $29 billion of disposals.
The impact of Macondo on this year’s M&A market is uncertain, Parker adds. “To date, Plains E&P is the only company to have announced major restructuring in the Gulf of Mexico post-Macondo. There was certainly no evidence of a reaction during the second half of 2010. On the contrary, record acquisition spend for the year underlined the strong allure of deepwater frontiers, Latin America and Africa in particular.
“We believe that much will depend on the regulatory and legislative fallout, which will take time to materialize. On balance, Wood Mackenzie anticipates that smaller players will scale down deepwater exposure, while bigger players will consolidate. For the time being, however, the vast majority of operators maintain a ‘wait and see’ approach,” concludes Parker.
01/26/2011