Oil & Gas Quarterly Deals Analysis Q4 2009
Oil & Gas Quarterly Deals Analysis Q4 2009
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GlobalData's "Oil & Gas Quarterly Deals Analysis Q4 2009" 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 Q4 2009. The report portrays detailed comparative data on the number of deals and their value in the last five quarters 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.
Marginal Increase In Investments In The Oil and Gas Industry In Q4 2009
Investments, including M&A, asset purchases, and capital raising through equity and debt, in the oil and gas industry increased marginally in the fourth quarter of 2009, from $114.7 billion in Q3 2009 to $115.6 billion in Q4 2009, as small/medium players are pulling out of the business due to financial crunch and growing oil price concerns. Consolidation activities also led to an increase in investments as global crude oil demand is predicted to remain below supply capacity. The number of oil and gas deals also increased from 716 deals in Q3 2009 to 742 deals in Q4 2009. The average and median value of deals in the oil and gas industry has seen a rapid increase from $266 million and $25 million respectively in Q3 2009 to $745 million and $30 million respectively in Q4 2009. The abnormal increase in the average deal value can be attributed to the Exxon Mobil's acquisition of XTO Energy for a whopping $41 Billion.
Mergers & Acquisitions In The Oil And Gas Industry Surged By 262% In Q4 2009
Merger and acquisitions in the oil and gas industry witnessed a substantial increase of 262% in the deal value reporting $57.1 billion in Q4 2009 compared to $15.8 billion in Q3 2009. The most watched Exxon Mobil's proposed acquisition of XTO Energy for $41 billion was the landmark deal contributing much to the total deal value in Q4 2009. The transaction is a 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 meet tougher air-pollution standards. The takeover gives Exxon a major position in so-called unconventional gas assets in North America, which include shale plays, where gas trapped in underground rock formations requires expensive and complex drilling techniques. However, the number of deals registered a marginal decline to 113 deals in Q4 2009 from 119 deals in Q3 2009.
The average P/E of oil and gas companies acquired, which reflects the willingness of the investors to pay for a company's earnings decreased to 8.9 times in Q4 2009 from 12.8 times in Q3 2009. Further, the average P/E ratio recorded a volatile trend over the last five quarters due to uncertainty in economic indicators, reflecting skepticism in the investors mind over oil and gas investments.
Further, asset transactions saw an increase in deal value reporting $17.2 billion in Q4 2009, compared to $14.7 billion in Q3 2009, due to the continued string of smaller asset transactions happening in the recent past due to volatility in crude oil prices.
According to Swati Singh, Analyst at GlobalData, "Merger and Acquisition (M&A) activity increased in the second half of 2009, reflecting improving market sentiment, commodity price outlook and capital market conditions. With crude oil prices stabilizing above $75 a barrel, the positive trend that we have seen in the recent months is likely to continue into 2010 with Asian companies expected to be the major players in the M&A landscape. The unconventional resource deposits will offer significant growth prospects and attract huge investments from both International Oil Companies (IOCs) and NOCs."
Increased Oil And Gas Asset Valuations For Acquisition and Asset Transactions
Oil and Gas valuations witnessed an increase of 35%, with the average deal implied value mounting to $69,440.2 per barrels of oil equivalent (Boe) of daily production in Q4 2009 from $51,495.7 per Boe of daily production in Q3 2009. The distressed sale of assets, oil price concerns, and additional capital requirement had presented opportunities for well capitalized players to acquire more assets from small/medium sized companies. On a year-on-year basis, oil and gas asset valuations increased by 5% registering $69,440.2 per Boe of daily production in Q4 2009 from $66,018.2 per Boe of daily production in Q4 2008. The increase was a result of daily production and increase in crude oil prices in Q4 2009. Additionally, the value of proved or 1P reserves increased by 24% to reach $17.8 per Boe and 2P reserves increased by 49% to reach $12.5 per Boe during the same period.
Decreased Financing Through Equity / Debt Offerings
Global equity offerings, including initial public offerings, secondary offerings, and private investment in public equities, decreased to $11.7 billion in Q4 2009 compared to $15 billion in Q3 2009. Raising equity capital remained a challenging task for the oil and gas companies, due to volatile oil prices and sentiments of retail and institutional investors. Further, the number of equity offering deals has seen an incremental approach with 31% increase, from 180 deals in Q3 2009 to 236 deals in Q4 2009.
Debt offerings, including public and private debt placements, also saw a declining trend from $66.2 billion in Q3 2009 to $28.7 billion in Q4 2009, due to limited availability of debt in the present market conditions and requirement of prevailing capital expenses. Further, the number of debt offering deals decreased to 71 deals in Q4 2009 from 104 deals in Q3 2009. The uncertain market conditions and the change of companies approach and confidence is favoring much towards equity offerings than debt offerings.
Decreased Private Equity Investments In Q4 2009
Private equity investment in the oil and gas registered a substantial drop out in the fourth quarter of 2009, albeit Q3 2009 showed a rapid increase due to stable oil prices over $70 per barrel. Private equity investors were wary in their movements with a close eye on the current market evolvement, reflecting in an investment drop out to $978.6 million in Q4 2009, from $3 billion in Q3 2009. Equipment and services segment garnered the large amount of private equity funding during Q4 2009, with $582 million raised from eight deals.
Texas Pacific's proposed investment of $500 million in Valerus Compression Services; and Petroleum Development and Lime Rock Partners' investment commitment of $203.5 million to PDC Mountaineer were some of the major deals registered in Q4 2009.
North America Registered An Increase In Investments, While The Other Regions Suffered A Significant Drop-Out In Q4 2009
North America, the only region to continue its trend of increasing investments in oil and gas properties/companies, witnessed an increase of 70% in investments to reach $85 billion in Q4 2009 compared to $50 billion in Q3 2009. Texas and Alberta were the hottest destinations for oil and investments, recording $57 billion and $13.5 billion respectively in Q4 2009.
Europe saw a substantial drop out, recording an investment of $8 billion in Q4 2009, compared to $37 billion in Q3 2009. Further, Asia-Pacific recorded a marginal decrease in investments from $12.8 billion in Q3 2009 to $12 billion in Q4 2009; and South and Central America investments declined to $4 billion in Q4 2009 compared to $8 billion in Q3 2009.
According to Swati Singh, Analyst at GlobalData, "North America accounted for around 60% of the deal value in 2009 and 7 out of 10 top oil and gas industry transactions. 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. Major IOCs and Asian National Oil companies are also looking to expand their footprint in unconventional gas and oil sands industries to offset their output declines from mature assets and to secure energy supplies. This will drive M&A investment in unconventional oil and gas sector in North America. Recent acquisitions such as Exxon Mobil's acquisition of XTO Energy and Suncor's acquisition of Petro-Canada highlight the interest of major integrated companies in the North America unconventional resource plays." For more details, please vist http://www.reportreserve.com/reportdet.php?company=GlobalData&reportid=10036
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