M&A Deal Value Fell 16% in 2000

The drop in global energy industry transaction values to $303.6 billion in 2000 from $360.2 billion a year earlier was actually a "return to normal" following several mega-mergers in 1999, according to a John S. Herold Inc. study released last week. The upstream global merger and acquisition transaction values totaled $112.2 billion in 2000, down 16% from $152.9 billion in 1999.

Rising natural gas prices created "sea changes in reserve values and deal weighting during the year," said Herold vice president Christopher Sheehan. "Worldwide implied oil and natural gas reserve value climbed 50% from the first quarter of 2000 to the fourth quarter," he said. "In North America, which accounted for 83% of total transaction value, the oil and natural gas reserve weighting shifted from 75% oil during the first quarter of 2000 to 70% natural gas in the fourth quarter."

The study showed that worldwide power industry transaction value slipped slightly in 2000 to $119.5 billion from $126.8 billion in 1999. Increased gas pipeline activity ignited a 24% increase in midstream deal value to $32.3 billion in 2000, up from $25.9 billion a year earlier. Also, poor petrochemical margins that dried up merger and acquisition activity triggered a plunge in downstream transaction value to $19.7 billion in 2000 from $43.1 billion in 1999.

For the oilfield equipment and services industry, E&P expenditures climbed, as deal value reached $16.6 billion in 2000 from $9.7 billion in 1999. Coal transactions in 2000 totaled $3.3 billion.

The Herold database of 2000 activity found that the Chevron/Texaco merger was "by far the biggest upstream transaction," valued at $44.8 billion. Anadarko's acquisition of Union Pacific Resources was second at $7.9 billion, followed by Phillips Petroleum's purchase of ARCO and BP's Alaskan oil assets ($7 billion); ENI's takeover of LASMO ($5.6 billion); and Royal Dutch/Shell's $4.3 billion acquisition of Woodside Petroleum.

The El Paso Energy/Coastal merger was the top midstream activity at $16 billion, and BP's purchase of Burmah Castrol was the top downstream deal ($5.6 billion). Power listings were led by FPL Group and Entergy's $14 billion merger. Transocean Sedco Forex's takeover of R&B Falcon was the top oilfield equipment and services merger at $8.9 billion.

For more information about the study, visit the Website at www.herold.com.

Carolyn Davis, Houston

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