In conjunction with international partner Derrick Petroleum Services reports that the Global M&A activity for upstream oil and gas deals in 2011 totaled $170 billion in 726 deals. The data set is from our industry leading Global M&A Transactions Database and includes all upstream oil and gas deals with values disclosed.According to Ronyld W. Wise, President of Houston-based PLS, Inc., "Total deal value in 2011 dropped 19% from 2010 record levels, yet the number of deals increased 15% to a record of 726. The relative strength of WTI and Brent oil prices, which averaged $95 and $111 per barrel, respectively, provided good fundamentals for both buyers and sellers to execute the deals. Activity in 2012 is expected to remain at a healthy pace as the industry continues to deploy large amounts of capital toward production development. Currently, we tally over $100 billion of assets on the market."
The buyers are dominated by international interests seeking to shore up longer term supply by investing in both proven conventional reserves worldwide and unconventional plays in the North America. Yashodeep Deodhar, Managing Partner, Derrick Petroleum Services, aptly points out, "The Chinese dominance in buying global oil and gas assets is highlighted by the fact that Sinopec has been the number one cash acquirer over the last three years, spending more than $35 billion between 2009 and 2011 to build a truly global footprint. Sinopec's cash was welcome in large capital intensive projects such as Repsol and Galp's pre-salt developments offshore Brazil and ConocoPhillips and Origin Energy's APLNG project in Australia. With continued healthy cash generation ($7.3 billion in H1 2011), Sinopec is expected to continue major acquisitions of global oil and gas assets, likely within unconventional shale plays worldwide, in countries such as the United States, Argentina and Poland. Today's announcement of Sinopec's $2.5 billion joint venture with Devon in five U.S. new venture plays is evidence of Sinopec's continuing acquisition strategy."
Table 1
Global Oil and Gas Deals - 2007 to 2011 Totals
Year Deals Value
(#) ($ B)
2011 726 $170
2010 630 $211
2009 460 $150
2008 495 $116
2007 470 $147
While the number of deals slowed in late 2011 due to uncertainty in the world financial markets, deal values in Q4 2011 set the high mark for the year. Highlights of Q4 2011 include KKR and partners' $7.2 billion acquisition of Tulsa-based privately held Samson Investments, Kinder Morgan's acquisition of El Paso ($7.2 billion attributed to the oil and gas assets included in the deal) and Statoil's $4.7 billion purchase of Brigham Exploration.
Table 2
Global Oil and Gas Deals - Top 5 in 2011
Month Buyer/Seller Value ($ B) Primary Country
July BHP/Petrohawk $15.1 United States
Feb. BP/Reliance $ 7.2 India
Oct. Kinder Morgan/El Paso(1) $ 7.2 United States
Nov. KKR et al/Samson $ 7.2 United States
Nov. Sinopec/Galp Energia $ 5.2 Brazil
(1). Value of oil and gas assets only. Part of $38 billion corporate acquisition.
Globally, the United States continues to lead upstream oil and gas deal activity with a 46% share of all deals and 51% of deal value followed by Canada with 27% and 9% share, respectively. According to Anders Wittemann, Associated Partner of Derrick Petroleum Services for EMEA, "Outside of North America, Europe, including the North Sea, in 2011 was the top region and reached a record high level at $14.4 billion or 8% of global share. This activity level, achieved by an extraordinary diversity of companies, has reaffirmed the strategic value and attractiveness of portfolios in the Europe/North Sea region."
Table 3
Global Oil and Gas Deals - 2011 Totals by Regions
Region Deals Value
(#) ($ B)
United States 334 $86
Canada 197 $16
Europe/North Sea 47 $14
South America 31 $13
Former Soviet Union 25 $13
Asia 18 $11
Africa 36 $10
Australia 30 $ 5
Middle East 8 $ 3
Total 726 $170
Corporate M&A activity, as opposed to asset purchases and joint ventures, represented 52% of global deal value in 2011. On a quarterly basis, corporate M&A share increased from 35% and 39% in Q1 and Q2 2011 to 65% and 62% in Q3 and Q4 2011, respectively. The high share of corporate M&A deals in the latter quarters points to the general uncertainty in the market which makes negotiating asset deals difficult. The same global trend also occurred in 2009 when the share of corporate M&A deals shot up to 73% from an average historical range of 35% to 45%.
As of January 1, 2012, the tally of upstream oil and gas assets on the market for sale stood at over $100 billion. Not surprisingly, approximately 30% of these are corporate M&A deals.
Looking forward, PLS and Derrick both expect the market for oil and gas assets to continue at a healthy pace driven in part by onshore North America's remarkable transformation from exploration, to exploitation to today's "manufacturing process," a technology that requires significant capital for full development of the resource. We expect the trend of independents such as Brigham, Petrohawk and XTO being sold to larger companies to continue especially in light of current North American gas prices and world oil prices.
Globally, growing Asian economies will continue to drive deal activity as buyers seek new oil and gas reserves and provide capital for world class exploration plays in areas such as West Africa, East Africa and Brazil deepwater.
PLS, Inc. and Derrick Petroleum Services are partners in providing U.S., Canadian and International clients with an industry leading Global and U.S. M&A database and related services. These databases are maintained 24/7 by a team of analysts and are accessible via the web.
SOURCE PLS, Inc.
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