Global upstream oil and natural gas deals in 2012 jumped 50% higher year/year to a record $254 billion in 679 mergers and acquisitions (M&A), according to data compiled by PLS Inc. and Derrick Petroleum Services.
The partners’ latest Global M&A Energy Transactions Database was released on Friday.
In 2011 there were 842 global M&As that totaled $170 billion. The prior M&A record was in 2010 when deal amounts totaled $212 billion for 684 transactions, noted PLS Managing Director Brian Lidsky. Three “mega deals” in 2012 accounted for more than one-third of the total transactions at $97 billion, or 38%, he said.
The top transaction last year was by Russia’s state-owned oil company OAO Rosneft, which paid $62 billion to acquire Russia’s TNK-BP, which had been half-owned by BP plc (see Daily GPI, Oct. 29, 2012).
The other top two transactions were in North America. Last month China’s CNOOC Ltd. was given federal approval to acquire Canada’s Nexen Inc. for $18 billion (see Daily GPI, Dec. 10, 2012). Also in December U.S.-based Freeport-McMoRan Copper & Gold paid $17.2 billion, including debt, to buy Plains Exploration & Production Co. and McMoRan Exploration Co. (see Daily GPI, Dec. 6, 2012).
“Excluding these mega-deals, 2012’s activity in terms of deal value is on par with the prior five-year annual average of $160 billion of deal activity annually,” according to the report. In the last three months of 2012, “we witnessed an unusually high level of deal activity totaling $137 billion in 181 deals.” Many sellers “were motivated to complete deals in advance of the uncertainties surrounding the second term of President Obama and the implications of U.S. governmental policy changes regarding the fiscal cliff.”
Globally, the United States led upstream oil and gas deal activity with one-third of the total deal value, with 299 deals for $83 billion, followed by the Former Soviet Union (23 deals, $75 billion), and Canada (194 deals, $50 billion).
“Outside of North America, Rosneft’s purchase of TNK-BP in Russia for $62 billion marked the second largest oil and gas deal recorded, behind Exxon’s $82 billion purchase of Mobil in 1998,” said Derrick Director Mangesh Hirve. “Other global hotspots besides Russia (15 deals) include the North Sea (40 deals), Australia (22 deals), and Colombia (14 deals).”
Last year’s dealmaking was lifted by oil price stability, according to the report. West Texas Intermediate oil prices “remained remarkably stable in 2012 and nearly mirrored the 2011 price path” of $80-110/bbl.
“In 2012, 46 deals of $1 billion or greater were inked, representing a total of $191 billion, or 75%, of the market,” the report noted. “This compares to 2011 which saw 37 deals of $1 billion or greater ($107 billion) representing 63% of the market. Of these large deals, 63% were for conventional assets, up from 49% in 2011.”
This year, M&A is expected to “track back to normal as growing oil supplies, particularly in the North American market, have a number of analysts expecting oil prices to maintain current levels or trend lower” (see related story). “The market has a healthy level of inventory as currently we are tracking over $85 billion of assets for sale where the estimated deal value is greater than $100 million.”
Asian national oil companies (NOC) “remain on a global buying spree to shore up long-term supply,” according to Derrick Managing Partner Yashodeep Deodhar. “China’s thirst for buying global oil and gas assets is continuing unabated,” led by the Nexen transaction.
Among the big Asian-led deals in 2012 were Sinopec International Petroleum Exploration and Production Corp.’s $2.5 billion purchase of Nigerian assets from Total SA; PetroChina International Ltd.’s $2.2 billion joint venture with Encana Corp. in Canada’s Duvernay Shale; CNOOC’s $2 billion buy of additional interest in an Australian liquefied natural gas (LNG) project from BG Group; and PetroChina’s $1.6 billion buy into Australia’s Browse LNG project from BHP Billiton.
“Corporate M&A activity, as opposed to asset purchases and joint ventures, represented 58% of global deal value in 2012, up from a 47% share in 2011,” the report noted. “The high water mark for corporate M&A activity remains at 73% seen in 2009 during a time when the global equity markets fully supported financing corporate takeover activity.”
As of Jan. 1, upstream assets for sale “stood at over $85 billion,” noted PLS and Derrick. “New large deals in the pipeline recently announced include ExxonMobil’s intent to sell 60% of the West Qurna-1 oilfield in southern Iraq, Murphy Oil selling select Canadian assets, and Total continuing a global noncore divestiture program.”
The deal flow for oil and gas transactions is expected to moderate from the year-end 2012 rush, noted the partners.
“Forces that will impact global dealmaking in the coming year include multi-year lows in North American gas prices that many believe have stabilized, a growing oil production profile in North America, a return to normal in the Gulf of Mexico, large and high-impact discoveries in East Africa, continued buying by Asian and Chinese firms especially to secure LNG feedstock, and political unrest in the Middle East.”
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