Global oil and gas transactions review 2012
Regional differences vary
Although global interest in acreage in Africa has continued, ongoing tensions and political instability may have impacted transaction activity in 2012. Africa’s transaction volumes increased from 93 in 2011 to 97 in 2012.
Though there has only been a moderate increase in transaction volume, reported transaction values have grown significantly, with US$11.7b of deals in 2012, up from US$7.7b reported for 2011.
In 2012, transaction activity in Australia was again relatively subdued. Continued tight conditions in equity markets meant Australia’s deal-hungry junior oil and gas companies remained starved of opportunity, and as a result, the number of deals remained steady at 86, compared with 84 last year.
However, over the period, the value of Australian oil and gas transactions more than doubled from US$7.8b to US$16.2b. Consistent with 2011, most of the transactions (88%) were in the upstream sector.
Interest in Canada’s oil and gas industry continues to grow around the world. Over the last year, the Canadian transactions market has been very active. Much of the activity can be attributed to the focus of well-capitalized players on technology-enabled oil and liquid plays, as well as a very challenging natural gas price environment for others that resulted in distressed M&A.
But Canadian transactions will look different in the future — influenced by macro-factors, including the growth of US unconventional oil and natural gas production, transportation and infrastructure constraints, increased environmental regulations, continued interest from Asian investors (both state-owned enterprises and private investors) and new clarity on the rules governing foreign investment.
In 2012, the CIS region showed significant activity and remarkable events in oil and gas transactions. The deal value of transactions in the region tripled from 2011 levels and reached US$77.3b, but the number of deals was slightly down from 2011.
Europe’s oil and gas sector delivered strong activity in 2012. Overall transaction volumes of 179 fell short of 2011’s 189 deals, but their combined value of US$29.3b exceeded the 2011 level of US$24.1b. Very few articles written about Europe’s economies during 2012 were able to comment on such positive trends.
Amid increasing domestic demand for oil and gas and insufficient scope to expand production domestically, the Asian NOCs continued to expand their presence overseas, amassing a strong reserves base to ensure the supply of oil and gas. After the Fukushima nuclear incident, Japanese oil and gas companies have significantly boosted overseas investment to acquire stakes in natural gas assets to meet rising domestic demand.
Inbound transaction activity increased in the Far East region in 2012, with reported deal value up from US$5b in 2011 to US$12.9b in 2012, and deal volumes up from 59 in 2011 to 79 in 2012. That strong growth notwithstanding, the “action” in Far East transaction activity is more notably outbound.
India’s dependence on energy imports continues to increase given the country’s stagnant domestic production and heightened demand of oil and gas. To augment domestic production and increase the availability of oil and gas, the government of India is considering changes to its policies to attract foreign investment.
Total reported oil and gas transaction value dropped in 2012, declining from US$10.5b in 2011 to US$4.5b in 2012. Similarly, deal activity, in terms of the number of deals, declined in 2012.
Despite large oil and gas reserves and a considerable oil and gas industry in the Middle East, global transactions in the region were limited.
The focus in 2012 remained on Kurdistan, with four of the five biggest deals concerning assets or operations on the oil-rich region of Iraq. The largest deals in the region were in the upstream and oilfield services sector, with limited activity in the midstream and downstream sectors.
Overall, there were 45 transactions in the MENA region, an increase of almost 14% over 2011. Reported transaction value declined however in 2012, from US$3.6b in 2011 to US$2.8b in 2012.
The dynamic US oil and gas transaction market experienced a slight softening in 2012 versus modest deal activity in 2011, but still remained over 10% above activity during the most recent oil and gas transaction cycle lows experienced in late 2008 and 2009.
Overall, oil and gas transaction values decreased 10% in 2012 versus 2011, while deal volume decreased almost 15% over the same period. US transactions accounted for almost 40% of total global oil and gas transaction values and volumes during 2012, down from approximately 50% and 45%, respectively, in 2011.