84% of survey respondents expect an increase in M&A — none expect a decrease.
M&A activity in the OFS industry is widely expected to increase over the next 12 to 24 months. Various changes within the oil and gas sector, in addition to OFS companies' race to develop new technology, will underpin M&A growth, according to respondents.
The vast majority of the survey respondents (84%) are expecting an increase in M&A — none expect a decrease. Nearly three-quarters of the respondents plan to acquire in the next 12 to 24 months. Companies based in North America are expected to lead all regions in activity, followed by Asia-Pacific.
Which region will see the greatest increase in OFS M&A activity?
North America: The US is expected to continue to dominate OFS M&A. With the emergence of shale gas/oil, E&P activity is rapidly expanding in many parts of the country, including the booming Bakken and Eagle Ford shales, as well as the Marcellus shale region spanning Pennsylvania, New York and West Virginia.
South America: Brazil will be the region's primary target, according to respondents. The country was among the top geographies for OFS-related M&A in 2011, with 32 deals worth US$16 billion, spurred along by the pre-salt discoveries off the coast of Rio de Janeiro.
Europe: Russia, the region's largest producer and exporter of oil and natural gas, is widely expected to lead M&A activity in the region for the next 12 to 24 months. With announcements like the Exxon and Rosneft joint venture to develop the Arctic, the region is expected to be one of the fastest growing markets for OFS companies.
Middle East and Africa: West Africa, respondents note, has emerged as a deepwater hot spot, with favorable government regulations in comparison to North America and Europe. In addition, the huge recent gas finds in East Africa hold tremendous opportunities for OFS.
Asia-Pacific: Rising domestic demand in emerging Asia will push major national oil companies (NOC) to ramp up their activity around the globe. Respondents add that OFS companies based in India and China are gaining prominence because of highly cost-efficient manufacturing.
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