Not only has the gas industry seen a surge in mergers, the valueof gas mergers and acquisitions has nearly quadrupled in thisdecade from $10.4 billion in 1990 to $39 billion in 1997, accordingto the Energy Information Administration.
The increase parallels a surge in corporate combinations(mergers, acquisitions, joint ventures and strategic alliances)across the energy sector, from $21.4 billion in 1990 to $106.4billion in 1997, and then, with the announcement of suchblockbuster mergers as British Petroleum with Amoco and Exxon withMobil, to $220 billion in 1998.
These findings were released last week by the EIA in an analysistitled “Mergers and Other Corporate Combinations in the Natural GasIndustry.” The findings are part of an upcoming EIA report titled”Natural Gas 1998: Issues and Trends” expected to be published nextmonth. EIA gathered information from the Mergers Yearbook, companypress releases, Internet sources, and Benjamin Schlesinger andAssociates research.
The growth in gas industry combinations does not indicate adecrease in competition, EIA said. For example, between 1992 and1997, the share of sales by the top four marketers declined byone-third to 21%, while their sales volumes more than doubled.Sales by the top 20 slipped only from 69 to 66% but sales volumesmore than tripled to 40 Tcf.
The current wave of corporate combinations appears set tocontinue as companies throughout the energy sector jockey forposition not only in North America but worldwide with both thenumber and size of combinations increasing. Nevertheless,combinations in the energy sector remained a relatively small partof corporate combinations in general, representing only about 11%of the total value of all combinations in 1997.
Corporate combinations in the natural gas industry have becomean integral part of the strategies developed to address changingconditions in the industry. Specific objectives behind thecombinations vary, but many combinations share the goal ofexpanding beyond a single commodity or a single function toencompass a broad spectrum of energy sources, products, andservices, thus becoming a “one-stop energy center.”
The types of business combinations enumerated by EIA are fulland partial, vertical and horizontal mergers, acquisitions, hostiletakeovers, divestitures, active salvage, joint ventures andalliances, and foreign investment. Becoming more popular are jointventures, particularly in areas of convergence, the EIA found.”Joint ventures are less binding than mergers, and although subjectto regulatory review, they avoid many of the complications that canencumber the merger process.”
William Trapmann, industry economist in EIA’s office of oil andgas, said the agency’s report is intended for use by federal andstate policy-makers attempting to understand changes taking placewithin the industry. “[From] the state level we often hear requestsfor additional information and insights that would help themunderstand some of the information they’re seeing before them.”
Joe Fisher, Houston
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