More than one-third of 169 senior oil and natural gas executives worldwide expect to go after acquisitions in the next year, according to EY’s ninth biannual Oil and Gas Capital confidence barometer.
In April, 27% of the energy executives said they planned to pursue mergers and acquisitions (M&A).
“The barometer shows a clear rebound in corporate confidence,” said EY’s Andy Brogan, global leader, Oil and Gas Transaction Advisory Services. “After several years of conservative decisionmaking, executives are steadily moving toward investing and growth. The increase in available credit indicates that conditions are improving globally, creating greater opportunities.”
The findings are part of EY’s survey of 1,600 senior executives worldwide, which included about 10% in the oil and gas sector.
Gaining more position in existing markets (79%) and in new markets (74%) are listed as the top drivers for planned activity.
“For the oil and gas respondents, these market share drivers have been increasing in relative importance over the past year,” according the survey. “Forty-one percent of respondents also indicated that the regulatory environment remains the primary reason for not pursuing an acquisition, up from 26% six months ago.”
In October, PwC reported that U.S. M&A activity had fallen because of a lack of midstream activity and mega energy deals (see Daily GPI, Oct. 31). A total of 43 oil and gas deals with values of more than $50 million were made between July and September, according to PwC.
There have been 680 announced E&P, midstream and oil services deals valued at a total of $125.7 billion so far this year, according to Bloomberg. The top acquirers in 2013 have been pipelines ($39.5 billion) and the top targets have been E&Ps ($45.6 billion).
About two-thirds of the oil and gas respondents in the EY survey said they wanted to put more emphasis on growth in the coming months over dealmaking because “the importance of organic growth has increased steadily, indicating a broader economic optimism.” Fifty-eight percent said they would focus their organic growth in lower risk areas, whereas last April, they favored higher risk areas.
Of the 1,600 people queried, 71% said the economy was improving, and nearly all (92%) viewed credit availability as stable or improving.
“Given the recent volatility in the global economy our respondents are still showing some justifiable caution,” said Brogan. “That said, the underlying appetite to invest and seize opportunities is higher than it has been for some time so we are most likely looking at an inflection point in M&A activity levels.”
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