Oil & Gas Annual Deals Analysis 2010
Oil & Gas Annual Deals Analysis 2010
Oil & Gas Annual Deals Analysis 2010
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Oil & Gas Investments Increased in 2009, Driven by Positive Commodity Price Outlook and Improved Capital Market Conditions
GlobalData's "Oil & Gas Annual Deals Analysis 2010" report is an essential source of data and trend analysis on the Mergers and Acquisitions (M&A) and financings in the oil and gas industry. The report provides detailed information on M&A, Equity/Debt Offerings, Private Equity, Venture Financing and Partnership transactions registered in the oil and gas industry in 2009. The report portrays detailed comparative data on the number of deals and their value in 2009, subdivided by deal types, segments, and geographies. Additionally, the report provides information on the top private equity, venture capital, and advisory firms in the oil and gas industry.
Data presented in this report is derived from GlobalData's proprietary in-house Energy eTrack deals database and primary and secondary research.
Investments Increased By 17% In The Oil and Gas Industry In 2009
Investments, including M&A, asset purchases, and capital raising through equity and debt, in the oil and gas industry increased from $433.1 billion in 2008 to $505.9 billion in 2009. The growing concern over the crude oil prices, difficult operating environment, ever-increasing customer demand, unstable regulatory environments and the reliability of supply had led majority of the troubled companies to dispose-off its business/assets, or looked at an appropriate partner for joint venture or M&A fit, to survive in the tumbling financial market. These factors also led to an overall increase in the business consolidation activity, and few large players with pocket full of reserves has been able to cash in on the lucrative low valuation M&A or asset transactions in the oil and gas industry in 2009.
However, the number of deals decreased from 2,979 deals in 2008 to 2,665 deals in 2009, primarily attributed to small number of large deals, which gave a significant boost to the overall deal value in 2009.
Mergers & Acquisitions Increased By 21% In The Oil And Gas Industry In 2009
M&A activity has seen passable transactions with a 21% increase in investments, registering $143.7 billion in 2009 compared to $118.5 billion in 2008. The increase in investments can primarily be attributed to the most watched Exxon Mobil's proposed acquisition of XTO Energy for $41 billion. The transaction is the major vote of confidence in natural gas and the latest sign that the top oil companies are looking to invest more in the cleaner-burning fuel that could help to meet tougher air-pollution standards. Suncor Energy's merger with Petro-Canada for $15.5 billion was also one of the major deals that caught the headlines in 2009. In terms of number of deals, the overall deal making activity remained calm in 2009, reporting a decrease in number of deals from 664 deals in 2008 to 453 deals in 2009.
Further, asset transactions observed a decline of 41% in deal value in 2009. The segment reported 912 deals worth $47.6 billion in 2009, compared to 1,024 deals worth $81.4 billion in 2008, attributed to drop out in the fairly stagnant US transactions environment. Country wise, Australia and China continued to shore up their energy production capabilities reporting 65 deals worth $2.7 billion and 11 deals worth $3.2 billion respectively in 2009.
According to Swati Singh, Lead Analyst at GlobalData, "The increase in oil & gas M&A activity in 2009 was driven by improving market sentiment, commodity price outlook and capital market conditions. The crude oil price recovered by 57% to around $75 per barrel from $45 per barrel in January 2009. With crude oil prices stabilizing around $75 a barrel, the positive trend in the number of deals that we have seen in the recent months is likely to continue into 2010 with Asian National Oil Companies expected to be the major players in the M&A landscape."
GlobalData expects corporate acquisitions and strategic partnerships between NOCs and IOCs to increase in 2010. The recent license awards in Iraq and Venezuela highlight the trend of reserve-rich countries inviting international oil and gas companies with capital, service and infrastructure capabilities to develop their domestic oil and gas industry.
Decreased Oil And Gas Asset Valuations For Acquisition and Asset Transactions
Oil and gas valuations witnessed a decline of 25% in 2009 because of volatility in oil prices and wider consolidation activities. The average deal implied value decreased from $76,946.8 per barrels of oil equivalent (Boe) of daily production in 2008 to $58,020.4 per Boe of daily production in 2009, with the market turmoil providing acquisition opportunities for the cash-rich players to buy distressed companies/assets at lower value. The difficult operating environment and less capital reserves/funding were some of the other factors that led to a drop out in asset valuations in 2009.
Additionally, the value of proved or 1P reserves decreased to $16.2 per Boe in 2009 from $18.1 per Boe in 2008 and 2P reserves decreased to $10.4 per Boe in 2009, compared to $12.3 per Boe in 2008 .
Surged Financing Through Equity / Debt Offerings
Global equity offerings, including initial public offerings, secondary offerings, and private investment in public equities (PIPE), increased from $65.6 billion in 2008 to $73.5 billion in 2009, despite the challenging task of raising equity capital in the uncertain market conditions. Additionally, the number of equity offering deals has seen an incremental approach with 25% increase to reach 704 deals in 2009 from 564 deals in 2008. Investments through PIPEs were the major contributor to the total equity capital raising, reporting 435 deals worth $33.5 billion in 2009.
Debt offerings, including public and private debt placements also witnessed a huge increment in value, reporting $236.5 billion in 2009 compared to $145.6 billion in 2008. Further, the number of debt offering deals also increased from 306 deals in 2008 to 408 deals in 2009. High volatility in stock prices have forced companies to choose lower risk financial instruments such as bonds and debentures to raise capital from the bearish investors. Companies' confidence in less risk orientation also favored traditional debt offerings to increase in 2009. The debt offering market has seen a CAGR of 52.25% from 2005-2009, providing a clear picture of financing through debt offering.
Decreased Private Equity/Venture Capital (PE/VC) Investments In 2009
The PE/VC market in the oil and gas industry registered a huge drop out in investments from $21.9 billion in 2008 to $4.6 billion in 2009. Further, the number of deals also decreased sharply from 129 deals in 2008 to 55 deals in 2009. This demonstrated that PE/VC investors were wary in their movements with a close eye on the current market evolvement after a slump and continued challenge of raising capital by number of players. North America was the major focus market for PE/VC investors, reporting $3.5 billion of investments in the oil and gas industry in 2009.
Major deals that were announced in 2009 include Global Infrastructure Partners' investment of $588 million in Chesapeake Midstream Partners; First Reserve Corporation's investment of $500 million in KrisEnergy Holdings; and Texas Pacific's proposed investment of $500 million in Valerus Compression Services.
Lime Rock Partners, LP emerged as the top firm in the oil and gas industry PE/VC segment, by participating in six deals worth $419.2 million in 2009. In second place, ArcLight Capital Partners recorded three deals worth $140.5 million during 2009.
North America And Europe Registered An Increase In Oil & Gas Investments In 2009
Overall, North America continued its dominance with more than 53% of the total oil and gas investments, reporting $268.3 billion in 2009, compared to $208.9 billion in 2008. State wise, Alberta in Canada and Texas in US accumulated majority of the deal flow in 2009. 500 oil and gas deals worth $57.4 billion were registered in Alberta and 335 deals worth $117.3 billion were recorded in Texas in 2009.
European region also saw a gradual increase in investments, despite weathering grim economic conditions. The interest in deal making activity remained strong in this region, with oil and gas investments increasing from $125.4 billion in 2008 to $142.7 billion in 2009. Further, South and Central America recorded an increase in investments from $20.9 billion in 2008 to $29.1 billion in 2009.
According to Swati Singh, Lead Analyst at GlobalData, "The investment on mergers and acquisitions in exploration and production sector totaled $155 billion in 2009, up by more than 5% from 2008, with North America accounting for around 66% of the total investment. North America also accounted for 7 out of the top 10 oil and gas industry transactions in the year. M&As in North America are expected to witness a sharp increase in 2010 driven by companies that are selling off their non-core assets to generate free cash flows to finance their core projects. "
Further, she added, "M&A investment in North America (especially in the unconventional gas and oil sands industries) by Asian national oil companies, especially from China, Korea and India, are also expected to increase in 2010. These companies will look to acquire overseas assets to expand their footprint and to secure future energy supplies." For more details, please vist http://www.reportreserve.com/reportdet.php?company=GlobalData&reportid=10039
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