Global oil and gas transactions review 2013

Regional differences vary

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Africa

2013 was a year of regional transaction themes and non-African NOC buyers. East Africa witnessed the big ticket transactions driven by the significant gas discoveries in Mozambique and Tanzania. West Africa saw more transactions activity in emerging oil and gas provinces due to the renewed exploration appetite in the
West African and West Transform Margins. Deep-water Morocco and Tunisian deals involved new entrants to North Africa, whilst the rest of the region saw low deal volumes, probably driven by political instability. South Africa and Namibia continued to attract new entrants into the region.

In 2013, whilst total transaction volumes fell to 92 from 107 deals in 2012, reported transaction value rose from $11.7 billion in 2012 to $22.2 billion.

Asia

With limited oil & gas reserves, deals within the Far East region typically accounts for a relatively small percentage of the Global Oil & Gas M & A market which shrank further in 2013.

Overall deal value was lower due to the absence of large deals in downstream and OFS, which shrank by as much as 90%. However, Asian NOCs dominance in the global market prevailed with the Chinese NOCs continuing their acquisition spree to secure energy supplies for the country. The largest deal for the year was between CNPC and Rosneft for $60 billion as upfront payment by the former, for supply of crude oil by the latter of 300,000 b/d for the next 25 years. To note, Asian buyers accounted for almost 40% of the value of deals greater than US$1b.

Australia

In 2013 transaction activity in Oceania was 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 fell considerably to 58, compared to 91 last year.

However, the value of regional oil and gas transactions over the period declined dramatically from $16.4 billion to $1.4 billion. Consistent with prior year’s most of the transactions (86%) were in the upstream sector, and this year’s upstream represented about 93% of the total reported deal value.

Canada

Global interest in Canada’s oil and gas industry continues to be strong although the actual transactions executed in 2013 pales in comparison to the robust deal market that existed in 2012.

The volume of Canadian transaction activity in 2013 was down by 32% compared to 2012 (178 vs. 260 — publically announced) and deal values fell even more dramatically decreasing by 77% year over year, from $55.5 billion to $12.8 billion. 2012 deal value was somewhat skewed due to the $15.1 billion CNOOC Limited-Nexen Inc and $5.8 billion Petronas-Progress Energy Resources deals; however, if you normalize these out deal value still declined by 63% year over year.

CIS/ Russia

In 2013, the CIS countries and primarily Russia, continued last year’s strong activity in oil and gas transactions. The reported value of deals in CIS/Russia in 2013 increased 46% to more than $110 billion, as compared to the 2012 total of almost $75 billion.

Among the key 2013 trends in Russian oil and gas sector are:

  • A continuation of industry consolidation,
  • An appearance of new large gas segment players, such as Rosneft and NOVATEK.
  • Rosneft remains the most active player and driving force in transactions in Russia.

Europe

Europe represents a diverse market for oil and gas M&A. There is substantial regional activity across the upstream sector and mid- and downstream assets.

2013 saw European oil and gas transaction volumes decline by 22% to 162 from the 208 deals recorded in 2012. Consequently, the total reported value of oil and gas transactions also declined to $20.7 billion from $30.3 billion in 2012, a decline of almost 32%.

2014 heralds the prospect of strengthening economic recovery in Europe. This should support positive sentiment in midstream and downstream activity, the two segments which have been most influenced by regional economic trends in recent years. Perhaps counter-intuitively, economic improvement is also likely to crystallize resolution around underperformers and a “refresh” in the financial markets could open the doors for a next generation of growth businesses, particularly likely amongst Europe’s upstream and oilfield services sectors.

India

M&A activity in the oil and gas sector in India continued to be dominated by outbound acquisitions by Indian National Oil Companies. India imports about 75% of its crude oil and 30% of its gas consumption and continues to be a growing energy market.

Outbound M&A activity from Indian NOCs is expected to remain strong in 2014, and in-bound LNG regasification and petrochemical projects are expected to attract domestic and inbound M&A interest. The transactions activity is expected to be in form of Joint Ventures in these large projects — the underlying driver being to induct a strategic partner who can be expected to bring strong raw material sourcing capabilities and access to international markets for the Indian player.

Latin America and the Caribbean

Oil and gas transaction activity in Latin America and the Caribbean in 2013 declined slightly in reported deal value term — dropping to just under $15 billion from just over $15 billion in 2012.

While activity in the region has historically been dominated by deals in Brazil, activity in 2013 was more broadly distributed across the region. Notable in 2013 were the inbound investments by NOCs from China, Russia, and India; critically, NOCs accounted for three of the five largest deals in the region in 2013.

Middle East

Whilst the Middle East has substantial oil and gas reserves and production, in the context of the global transactions market, both current and historic levels of activity are relatively low.

The deal activity was geographically spread with countries such as the UAE, Oman and Iraq being the locations of multiple transactions. Overall the actual number of transactions in the region fell 40% from 44 in 2012 to 26 in 2013, whereas the overall transaction value increased slightly from $2.7 billion in 2012 to $3.1 billion in 2013.

United States

The US oil and gas transaction market was very active in 2013 although it was depressed compared to the past two years’ activity levels.

Overall in 2013, oil and gas transactions values decreased 37%, while deal volume decreased 21% compared to 2012. US transactions accounted for nearly 31% of total global oil and gas transaction values in 2013 (vs. 40% in 2012) and 39% of the transaction volumes (vs.38% in 2012).

In general, 2013 was characterized by a fairly steady flow of US oil and gas M&A activity in each of the first three quarters of the year with a drop-off in the fourth quarter.