Global oil and gas M&A faces tough 2012
Release Date: 2012-01-19
LONDON, Jan 19 (Reuters) - Oil and gas company mergers and acquisitions rose in number but fell in total value in 2011 due to a decline in transactions topping $1 billon, according to an analysis of activity by global law firm Ernst & Young .
Funding difficulties and euro zone debt fears could keep a leash on deal-making in 2012, particularly in the economically sensitive parts of the downstream sector, the firm warned.
Companies struck 1,322 deals worth $317 billion, compared with $341 billion recorded in 2010 due to a decline in mega-deals from 76 to 71.
The number of deals rose by more than 5 percent. North America continued to fuel activity with 562 deals in the upstream sector, but Europe and ex-Soviet states saw the strongest growth, the report said.
"The oil and gas market has proved that it can adapt to higher levels of uncertainty and keep transacting. The key questions now are how it will cope with the combination of commodity price volatility and structural contraction in global debt capacity," Andy Brogan of Ernst & Young's transaction advisory services said.
Shale-related transactions are tipped to see growth as China moves to develop its unconventional resource base, the biggest in the world with 19 percent of global reserves.
About $66 billion was spent on shale transactions.
Activity in the downstream sector declined modestly during 2011, but overall values were comparable with 2010 levels.
"Downstream activity will continue but may be more concentrated in storage and midstream rather than refining." Brogan said.
In oilfield services, high capitalization rates and opportunism meant an increase in deal activity that is set to continue in 2012, "underpinned by those seeking new geographies, new customers and new technologies", the firm said.
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