Oil and gas M&A to rise on back of suppressed share prices, says consultancy

Global oil and gas mergers and acquisitions, especially in the exploration and production end of the business, are expected to rise on the back of suppressed stock prices, according to industry consultants 1Derrick.

The Singapore-based global outfit’s latest examination of the industry M&A landscape suggests megadeals were back on the table in the second quarter with eight big ticket transactions, as opposed to none in the first quarter.

Corporate deals dominated data over the first half of the year on the back of Shell’s headline grabbing $82 billion offer to acquire BG Group.

“Since the past few months, we are seeing a healthy uptick in terms of M&A deals announced,” Mangesh Hirve, managing director of 1Derrick, told Sharecast.

“In light of market uncertainties, corporate M&A usually is on the rise – in 2015, so far, $100bn worth corporate M&A was announced in the upstream segment. The market is expecting more corporate M&A on the back of suppressed stock prices.”

The consultancy found that the US was not the top region over the first half of 2015, rather South and Central America accounted for 36%, followed by Australia and Africa.

In the second quarter, corporate oil and gas packages were reduced as Capio and New Star were acquired, Noreco and RusPetro were financially restructured while Argent suspended its strategic alternatives, the consultancy noted.

Significant packages announced over the second quarter include ConocoPhillips’ non-core assets in Rockies, Texas and Louisiana, EnCana’s Haynesville assets, and Eni’s 12% interest in Heidelberg, GoM, Petrobras’ pre-salt discoveries in Brazil and Qatar Petroleum’s Al Shaheen field.

While it’s early days, Hirve opined that aggregate M&A valuation data recorded by 1Derrick pointed to a recovery similar to that seen in 2009.

“Furthermore, the market remains well supplied with assets on sale across all geographies.”