With record-level transactions in the first quarter, 90% of oil and gas executives expect global dealmaking to only improve in the coming months, up from only 43% in April 2017 that expressed confidence in more dealmaking.

The latest EY Oil & Gas Global Capital Confidence Barometer (CCB) issued on Monday, which surveyed senior energy executives, found that 90% were optimistic about merger and acquisition (M&A) activity in the next 12 months, the highest dealmaking appetite among all sectors surveyed by EY, which refers to global member firms of Ernst & Young Global Ltd.

Close to two-thirds (62%) of the energy executives said they intended to pursue transactions in the next year, versus 52% of other sectors surveyed.

The latest CCB found that “major broad indicators, such as oil price stabilization and continued growth in demand,” in addition to production discipline that has been demonstrated by the Organization of the Petroleum Exporting Countries and countries that are not members, “has instilled confidence in oil and gas dealmaking over the past six months,” said EY’s Andy Brogan, global oil and gas transactions leader.

“But with government policy becoming harder to predict across the globe, companies are mindful that any increases in protectionism could have an impact on the efficient flow of goods and services across the sector.”

Looking ahead, 90% of oil and gas sector executives view global economic growth as improving or stable. However, respondents cited inflation (49%) and market volatility (40%) as the biggest risks to investment plans, amid rising oil prices and oilfield services looking to renegotiate contracts at higher rates.

Oil and gas executives also view political uncertainty (54%) and geopolitical tensions (40%) as the two biggest risks to growth.

The survey found that uncertainty and related disruption is driving M&A across the sector, with 60% now placing portfolio transformation at the top of their boardroom agenda.

“As businesses look to optimize their fitness for the future, 48% of executives say they are reviewing their portfolios every six months or more, while close to half (42%) say they have increased the frequency of reviews compared with three years ago.”

The oil and gas companies are being proactive in portfolio management, which is aligning with shareholder expectations, according to the survey.

More than one-third of executives (35%) expect to focus their influence on divestments over the next 12 months. The CCB also found that more than half (56%) plan to divest underperforming assets or assets “that are prone to disruption within the next year, as they seek to streamline operations and increase agility in response to the changing landscape.”

The survey aligns with the latest EY Oil & Gas Global Divestment Study, which found that 87% of oil and gas executives expect to divest within the next two years. And 90% plan to invest in improving operating efficiency and to address changing customer needs.

“Movement of assets is creating a robust oil and gas M&A market, and the focus on portfolio transformation has spurred activity and renewed confidence across the sector,” Brogan said. “Indeed, the latest EY Global Capital Confidence Barometer finds that 73% of oil and gas executives expect to complete more deals in the next 12 months compared with 37% just six months ago.

“It isn’t surprising, therefore, that 74% expect their M&A pipeline to increase in the next year.” Because of increased M&A activity, 90% of of those surveyed expect to see a corresponding increase in competition.

“Sixty-eight percent expect to continue going head-to-head with private equity (PE) particularly for pre-development upstream assets or later life mature assets,” according to the CCB. “The report anticipates, however, that increasing activity among PE players and the adoption of more innovative transaction structures will drive upstream M&A in 2018.”