Despite the distorting effects of some large transactions in the fourth quarter of 2012, the outlook for activity in the global oil and gas industry remained healthy for 2013, advisory firm Ernst & Young’s Global Oil and Gas Transactions Review indicated.
With an average of more than four transactions a day in 2012, the oil and gas sector remained one of the most active global sectors for mergers and acquisitions.
“2013 appears to face many of the same geopolitical and economic uncertainties as 2012 and, unfortunately, these do not seem likely to be fully resolved soon. However, in the absence of material shocks, we currently expect the sector to continue to be resilient in mergers and acquisitions terms, as the key strategic drivers remain the same and participants have become accustomed to making decisions in a highly uncertain environment,” Ernst & Young oil and gas transaction advisory services global leader Andy Brogan noted.
He added that, while capital availability was generally improving, funding would remain a challenge for smaller companies. Cash constraints, coupled with cost escalation, was expected to be a driver for asset and corporate opportunities.
“Those at the larger end of the scale, with stronger balance sheets, are likely to be the beneficiaries of this,” Brogan stated.
Meanwhile, the global value of oil and gas transactions increased to $402-billion during the year, representing a 19% increase compared with $337-billion in 2011.
A total of 92 oil and gas transactions exceeded $1-billion, compared with 71 transactions in 2011. Large deals included Rosneft’s acquisition of TNK-BP for a combined $60-billion and Kinder Morgan’s acquisition of El Paso for $38-billion.
Africa’s transaction volume increased from 93 in 2011 to 97 in 2012. Although this signified moderate growth, transaction values grew significantly to $11.7-billion in 2012, up from $7.7-billion in 2011.
Sinopec’s $2.5-billion acquisition of Total’s 20% interest in Nigerian deep-water block OML 138 was the largest oil and gas transaction in Africa during 2012 and gave a significant boost to the average deal value.
The report anticipated greater deal flow and consistency with the 2012 regional trends during 2013.