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Global oil and gas transaction activity by sector

Oilfield Technology,

According to EY, oil and gas has remained one of the most active and resilient global sectors for mergers and acquisitions, with an average of almost four transactions per day.

In 2013, the total disclosed oil and gas transaction value was US$ 337 billion. This total was significantly lower (down 21%) than the record high of US$ 423 billion posted in 2012.

EY notes that in 2013, there was a reduced willingness to commit to larger transactions. In 2012, 98 oil and gas transactions exceeded US$ 1 billion, compared with just 70 in 2013. In 2012, there were four ‘mega-deals’, with reported values over US$ 10 billion, but in 2013 there were only three.

Oilfield services segment declining

Transaction activity in the oilfield services (OFC) sector declined in 2013, with 185 deals announced compared with 243 in 2012 and 201 in 2011. According to EY, the average disclosed deal value fell from US$ 244 million to US$ 179 million, marking a continuous decline from the 2011 peak of US$ 416 million.

The drop in accumulated deal value between 2012 and 2013 is a consequence of a combination of both a slowdown in deal activities among the global diversified oilfield services companies, as well as a general slowdown in deals in the usually vibrant and active OFS acquisition market in North America.

A considerable number of the transactions were related to the offshore market, where heavy assets deals dominated both within the support vessels category as well as in the mobile offshore drilling unit category. The offshore services vessels related transaction accounted for 10% by deal count in 2013.

Midstream transaction activity drops

Deal activity in the midstream sector was down almost 14% in 2013. However, reported or disclosed deal value increased to US$ 72 billion, an increase of approximately 17% on 2012.

Midstream transaction activity, both in terms of the number of deals and the reported value of deals is dominated by the US and Canada. Together, the two countries accounted for more than 70% of all midstream deals and about 70% of the global midstream disclosed value.

Deal activity involving pipelines accounted for the largest portion of midstream activity, according to EY. 40% and almost US$ 27 billion in disclosed value involved pipelines. There were 33 transactions involving gathering assets in 2013 (37%), with total disclosed deal value of approximately US$ 27 billion (40% of the total). Asset transactions dominate the midstream, accounting for 77% of all deals and approximately 59% of all disclosed transaction value.

Downstream activity decreases

According to EY, the downstream segment saw a sharp decline in transaction activity in 2013, with a number of deals down by almost 45% compared to 2012. Activity was down in almost all of the sub-regions, particularly so in the two sub-regions that typically dominate downstream activity – the US and Europe.

Total disclosed deal value in the downstream segment reached just over US$ 14 billion in 2013, a decline of almost 70% compared to 2012. In terms of transaction value, the gas distribution sub-segment accounted for 34% of the downstream total, while terminals and refining accounted for 29% and 10% respectively.

Refining margins were generally off slightly year-on-year in most markets, with US average margins continuing to be substantially higher than those in Europe and in Asia. Refiners broadly kept utilisation under control in 2013, but oil demand worries, particularly in Europe, remain in the forefront, especially given the surge in new refining capacity coming out of the Middle East and Asia in the next few years.

EY accentuates that as a result of the looming capacity imbalance, combined with increasingly stringent environmental and product quality standards, there will be increasing pressures once again on the marginal European refiners, potentially opening opportunities for transaction activity.

Adapted from a report by Emma McAleavey.

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