Global energy industry mergers and acquisition transaction value dropped to $243.5 billion in 2001 from $264.4 billion a year earlier, triggered by a 24% decline in upstream global value to $81.5 billion, according to energy research and consulting firm John S. Herold Inc. U.S. implied reserve values climbed to $6.99/boe and Canadian values jumped to $6.55/boe, both record highs since Herold began tracking activity in 1988.

“North American implied reserve value climbed with commodity prices through 2000 and into 2001, but continued to remain elevated despite falling oil and gas prices later in the year,” said Christopher Sheehan, Herold senior vice president. “The widening gap between what sellers were asking and what buyers wanted to pay resulted in North American volume declining nearly 15% in 2001.”

With North American implied costs so high, Herold found that buyers increasingly turned their attention to the much lower implied reserve values for assets in higher risk/higher reward frontier areas. Overseas deal volume rebounded in 2001 from a five-year low, accounting for 43% of transaction value compared with just 17% in 2000.

Herold also found that worldwide power industry transaction value dipped slightly in 2001 to $82.6 billion from $84.8 billion in 1999. Huge U.S. refining mergers caused downstream M&A transaction value to jump to $35.4 billion in 2001 from $19.9 billion the preceding year. Gas pipeline deal value fell by more than half as total midstream activity declined to $22.3 billion in 2001 from $32.3 billion in 2000. Consolidation in the oilfield equipment and services sector pushed deal value to $20.1 billion from $16.7 billion in 2000. Coal transactions in 2001 totaled $1.4 billion.

The proposed Phillips/Conoco merger was “by far” the biggest upstream transaction at $25.9 billion, said Herold. Conoco’s acquisition of Gulf Canada was second at $6.5 billion. Duke Energy’s purchase of Canadian Westcoast Energy topped all midstream deals at $8.4 billion, while Phillips’ $9.8 billion acquisition of Tosco was the biggest downstream deal.

The takeover of Italian firm Montedison by Eletricite de France and Fiat led the power listings at $15.3 billion, followed by E.ON’s acquisition of Powergen for $13.3 billion. The merger of drillers Santa Fe International and Global Marine led oilfield equipment and services activity at $3.7 billion.

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