For the first time in five years, natural gas accounted for more than half of transacted reserves globally in 2006, a new report on global upstream mergers and acquisitions (M&A) has found.
“In 2006, despite a year-over-year decline in natural gas prices, gas comprised 53% of the total transacted proved reserves, a 10-year high,” according to the 2007 Global Upstream M&A Review (GUMAR) by John S. Herold Inc. and Harrison Lovegrove & Co. “Deals focused on gas were transacted at a dollar per boe premium to oil-weighted acquisitions both in North America and outside North America.”
Overall, the volume of global upstream M&A deal value reached the highest level since the peak of the mega-merger era in 1998, according to the report. Total deal value was $166 billion in 2006.
The two largest deals last year — Statoil/Norsk Hydro (see Daily GPI, Dec. 19, 2006) and Anadarko Petroleum Corp./Kerr-McGee Corp. (see Daily GPI, June 26, 2006) — and four of the top five transactions — including Anadarko’s acquisition of Western Gas Resources Inc. — were predominantly gas weighted.
“For the fifth consecutive year, North American deals were predominantly gas (60% in 2006), while 2006 marked the highest gas percentage ever for outside North America transactions at nearly 50% of total,” the report said. “While oil sands deals caused the gas percentage of North American deals to dip slightly, the rise in gas-weighting of transacted outside North America and total worldwide proved reserves accelerated, continuing a three-year upward trend.”
The maturity of conventional basins continued to make unconventional plays attractive to North American and international exploration and production (E&P) companies, the report found. A significant portion of gas reserves acquired in 2006 centered on unconventional resources and liquefied natural gas (LNG)-related assets. These included tight gas, such as in the Barnett Shale; Russian gas, Sakhalin II, for instance; and coalbed methane, as in the Rocky Mountains and Australia.
“Onshore and offshore gas basins from the U.S. to Asia-Pacific to Russia to Europe are increasingly enticing to an industry struggling to replace reserves and serve growing global gas demand,” the report said.
For information on the report, visit the John S. Herold website, www.herold.com.
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