Oil & Gas Annual Deals Analysis 2012

Additional Information

GlobalData's “Oil & Gas Annual Deals Analysis 2012” report is a reliable source of essential data and trend analysis of mergers and acquisitions (M&As) and financing in the oil and gas industry. The report provides detailed information on M&As, equity/debt offerings, private equity (PE), venture financing and partnership transactions recorded in the oil and gas industry in 2011. The report offers detailed comparative data on the number of deals and deal values in the last five quarters segregated into deal types, segments, and geographies. Besides, the report provides information on the top PE, venture capital (VC), and advisory firms in the oil and gas industry.

GlobalData derived the data presented in this report from proprietary in-house Energy eTrack deals database, and through primary and secondary research.

Mergers & Acquisitions Increase In The Oil And Gas Industry In 2011

M&As, which include change in ownership and control of companies (GlobalData does not consider this value as a new investment in the market), recorded an increase in deal value from $173.9 billion in 2010 to $213.1 billion in 2011. Q4 2011 was particularly one of the best quarters in terms of deal value, with $70.2 billion. Kinder Morgan’s agreement to acquire El Paso for $37.8 billion was the major deal that led a substantial increase in deal value in Q4 2011. In the transaction, the midstream assets of El Paso were valued at $31.8 billion, while the upstream assets were valued at $6 billion. The industry majors intended to capture more opportunities in the oil and gas sector in 2011, as the global credit market recorded continuous improvement with stabilized commodity prices.

The number of M&A deals increased marginally from 608 deals in 2010 to 631 deals in 2011. The number of deals in each quarter differed marginally with 152, 166, 144 and 169 deals in Q1, Q2, Q3 and Q4 2011 respectively.

Of the total, the M&A activity was driven largely by deals of greater than $1 billion value, with 41 deals worth $160.7 billion in 2011, which accounted for 75% of the total deal value.

The average deal value in the oil and gas industry registered an increase from $458.8m in 2010 to $539.6m in 2011. The average median deal value increased from $41m in 2010 to $55m in 2011. North America, in particular, registered a huge increase in average deal value from $433m in 2010 to $745m in 2011, owing to high value M&A activity in the region.

North America remained the most attractive destination for M&A activity in 2011, as domestic and international buyers continued to focus on producing oil and gas primarily through unconventional procedures. The region registered 323 deals worth $141.5 billion in 2011, as compared to 312 deals worth $83.6 billion in 2010. Of the total, the United States recorded 223 deals worth $130.4 billion, representing 69% of the total number of deals and 92% of the deal value in the region.

According to Swati Singh, Lead Analyst at GlobalData, “M&A activity in the Oil & Gas industry rose in 2011 as compared to 2010 both in terms of deal volume and the total deal value. Oil and gas companies struck 657 M&A deals worth $278 billion, compared with 638 M&A deals worth $217 billion recorded in 2010. The top 15 M&A transactions accounted for 44% of the total deal value on 2011; the largest transactions included Kinder Morgan's acquisition of El Paso for $37.8 Billion and BHP Billiton acquisition of Petrohawk Energy for $15.1 Billion. With crude oil prices stabilizing above $95 a barrel, the positive trend that we have seen in the recent months is likely to continue into 2012 with Asian companies expected to be the major players in the M&A landscape. Major IOCs and Asian National Oil companies are expected to drive M&A investment in unconventional oil and gas sector to offset their output declines from mature assets and to secure energy supplies.”

Asset Transactions Decline In The Oil And Gas Industry In 2011

Asset transactions in the oil and gas industry, which include the purchase of oil and gas properties and equipment, registered a decrease in the number of deals and deal value, reporting 1,203 deals worth $85.7 billion in 2011, as compared to 1,252 deals worth $109 billion in 2010, indicating a marginal decrease of 4% in the number of deals and 21% in deal value. The decrease in asset transactions in 2011 was due to the growing economic uncertainty.

AsherXino’s acquisition of a 40% interest in OPL 289 in Nigeria from Cleanwaters Consortium & Seven Waves for $14 billion; BP’s acquisition of Devon Energy’s oil assets in Brazil and the US, and the ACG field in Azerbaijan for $7 billion; Apache’s acquisition of upstream assets in Western Alberta & British Columbia and in the Permian Basin from BP for $6.4 billion; and CONSOL Energy’s acquisition of E&P business in Appalachian from Dominion Resource for $3.5 billion were some of the high value deals that changed the deal value scenario in 2010.

North America, a key region driving the global oil and gas industry, accounted for 65% of the total number of deals and 54% of the total deal value with 785 deals worth $46.6 billion in 2011, down 3% in the number of deals and 33% in deal value in 2010. In particular, the United States accounted for 80% of the total deal value with $37.5 billion and 71% in terms of the number of deals in 2011.

In the shale play areas, the industry recorded 263 deals worth around $30 billion in 2011, as compared to 245 deals worth $26.2 billion in 2010. American Standard Energy, Mountainview Energy, Antares Energy, and Chevron were some of the industry majors that forayed into the shale play areas in 2011 to increase their portfolio in the high potential minimal exploratory risk-oriented unconventional shale gas plays specifically in Canada and the United States such as Barnett, Haynesville, Bakken, Eagle Ford, Marcellus and Fayetteville shales.

The average cost ($) per barrel of daily oil equivalent production (boepd) incurred by companies for the acquired upstream assets/companies registered an increase from $75,599.6 in 2010 to $82,109.7 in 2011. In addition, the average deal implied value of 1P or proved reserves increased from $17.2 in 2010 to $17.5 in 2011.

According to Swati Singh, Lead Analyst at GlobalData, “Unconventional assets transaction dominated the assets market in 2011. Super major energy companies and NOCs dominated the asset transaction market in 2011. Unconventional oil and gas resources will continue to dominate oil and gas M&A activities and companies focus will be more towards liquid rich shale gas plays (Eagle Ford, Marcellus) and oil shale plays such as Bakken. Frontier deepwater areas such as Ghana, Israel and Mozambique will see some assets transaction in coming years especially from supermajors with deeper pockets and better access to technological experience.”

New Investments In Oil and Gas Industry Decreased In 2011

Investments in oil and gas companies, including financing through equity offerings, debt offerings, private equity and venture financing, registered a decrease in the number of deals and deal value with 1,508 deals worth $269.6 billion in 2011, as compared to 1,571 deals worth $352.7 billion in 2010. The decrease in the number of deals and deal value was due to slow activity in the equity offerings market, which did not look as promising in the oil and gas industry. Moreover, fears of financial crises also affected the equity market globally to a certain extent in 2011.

The upstream sector registered a decrease of 36% in total investment with $157.2 billion in 2011, as compared to $245.2 billion in 2010. The majority of the upstream companies focused on realigning their portfolios in 2011. As a result, many well funded industry players opted for M&As using their available funds as opposed to new financing through market. Equipment and services sector registered an improvement and was able to attract more investment in 2011. The equipment and services sector registered an increase of 10% in the number of deals and 7% in deal value with 262 deals worth $56.3 billion in 2011, as compared to 238 deals worth $52.8 billion in 2010.

GlobalData expects that following the low investment scenario in the oil and gas sector in 2011, the industry is expected to attract new investments in the future. This will primarily be driven by increased capital market, refining margins, diversified portfolio of companies, relatively stable commodity prices and investor confidence. Thus, the industry is all set to support the movement of funds, enabling companies to look for future acquisitions and expansion in the global arena.

Issuance Of Equity And Debt Securities Reduced In 2011

Global capital raising by oil and gas companies, through equity offerings, including initial public offerings (IPO), secondary offerings, and private investment in public equities (PIPEs), reported a decline in the number of deals and deal values in 2011. There were 982 deals worth $63.5 billion in 2011, as compared to 1,066 deals worth $148.2 billion in 2010, indicating a decrease of 8% in the number of deals and 57% in deal values. The difference in deal values was due to the highest contribution from Petroleo Brasileiro (Petrobras), which recorded two separate secondary offering deals of $40.8 billion and $28.2 billion in 2010.

In particular, secondary offerings registered a sharp decrease in deal value, reporting $35 billion in 2011, as compared to $114.9 billion in 2010. IPOs recorded an increase in the number of deals and a marginal decrease in deal value, with 61 deals worth $11.9 billion in 2011, as compared to 40 deals worth $12.7 billion in 2010.

Debt offerings, including secondary offerings and private debt placements, registered a marginal increase of 3% in the number of deals and a marginal decrease of 5% in deal value with 407 deals worth $186.3 billion in 2011, as compared to 395 deals worth $196.7 billion in 2011.Capital raising, through debt offerings by companies in North America, registered a decrease in the number of deals and deal value with 931 deals worth $131.8 billion in 2011, as compared to 997 deals worth $136.1 billion in 2010. Capital raising by companies in Europe also decreased from 192 deals worth $67.4 billion in 2010 to 177 deals worth $65.8 billion in 2011.

Surge In Private Equity/Venture Capital (PE/VC) Investments In 2011

The PE/VC market in the oil and gas industry registered a huge increase in investments from $7.8 billion in 2010 to $19.8 billion in 2011. The number of deals also increased from 110 deals in 2010 to 119 deals in 2011. North America was the major focus market for PE/VC investors with $15.1 billion investments in the oil and gas industry in 2011. Major deals announced in 2011 include KKR, Crestview Partners, NGP Energy Capital and ITOCHU’s agreement to acquire Samson Investment for $7.2 billion, PAI Partners’s sale of SPIE for $3 billion and KKR’s agreement to acquire Capital Safety from Arle Capital and Electra Private Equity for $1.12 billion.

Warburg Pincus LLC topped the PE/VC rankings by participating in seven financing deals worth $1.2 billion for 2011. Kayne Anderson Capital Advisors L.P. was ranked second with six deals worth $451m during the same period.

Increased Deal Activity In North America and Europe In 2011

North America, which is the major deal making region, accounted for 59% of deal value with $335 billion in 2011, as compared to $295.6 billion in 2010. National oil companies and industry majors strengthen their foothold in the North American oil and gas market to secure energy supply and increase their reserves, and obtain stakes in high potential unconventional gas resources, which have minimal exploratory risks. The number of deals decreased from 2,228 in 2010 to 2,164 deals in 2011.

Europe recorded a significant increase in deal value with $138.6 billion in 2011, as compared to $116 billion in 2010. Europe registered some of the high value deals that changed the deal value dynamics, including Centrica’s public offering of notes for $8 billion, Total’s sale of 48.83% stake in CEPSA to IPIC for $5 billion and Total’s acquisition of 12.1% stake in OAO NOVATEK for $4 billion.

Asia Pacific reported a decrease in the number of deals and deal value with 500 deals worth $42.4 billion in 2011, as compared to 533 deals worth $69 billion in 2010. The rest of the world (ROW), including South and Central America and the Middle East and Africa, registered a sharp decrease in deal value with $56.2 billion in 2011, as compared to $157.8 billion in 2010. The number of deals also recorded a decrease from 334 deals in 2010 to 313 deals in 2011.