M&As in the upstream industry are at the highest level since December 2014

Upstream oil and gas deals activity, including capital markets and mergers and acquisitions (M&A), totalled US$23.5 billion from 114 transactions in May 2015, an almost US$75 billion drop in value from the US$98.4 billion achieved across 111 deals in April 2015, says research and consulting firm GlobalData.

M&A accounted for 50% of total upstream deals activity in May 2015

According to the company’s latest monthly upstream deals review, M&A accounted for 50% of total upstream deals activity in May 2015, with a value of US$11.7 billion across 13 transactions. This also represents a significant drop from the US$71.2 billion recorded in April 2015, which was boosted by Shell’s agreement to acquire BG Group for US$69.9 billion.

North America led the global acquisitions market with US$12 billion from 35 deals, representing a 97% share. Of these deals, 26 were announced, with a combined value of US$11.9 billion, while nine were completed, totaling US$76.2 million.

Buyers taking advantage of market conditions

Matthew Jurecky, GlobalData’s Head of Oil & Gas Research and Consulting, says: “M&A deal flow is at the highest level since December last year, excluding the Shell-BG deal, and buyers appear more aggressive to take advantage of market conditions.”

Shell’s acquisition of BG Group

Jurecky adds that the Americas’ top deal in May was Alfa and Harbour Energy’s announcement to acquire the remaining 81.05% stake in Pacific Rubiales Energy for approximately US$5.3 billion, including assumed debt of US$3.9 billion. This represents the fourth largest upstream deal announced since oil prices collapsed, after Shell’s acquisition of BG, Repsol’s purchase of Talisman, and LetterOne acquiring RWE’s upstream assets.

Jurecky continues: “If Alfa’s offer proves successful, the company will have skillfully capitalized on low oil prices ravaging Pacific Rubiales’ share price, which has dropped by over 70%.

“Although a significant premium is being paid to the current price, rising oil prices would ultimately make the deal a bargain. Furthermore, it is a strong move strategically for more participation in Mexico, one of the top upstream markets globally in terms of opportunity.”

Adapted from press release by Cecilia Rehn

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