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Major O&G Cos' Asset Sales Outpace Asset Acquisitions in 2012

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Major oil and gas companies sold $56 billion in assets and made $13 billion in acquisitions in 2012, representing a negative $60 billion swing in net acquisitions, according to Wood Mackenzie's annual M&A [merger and acquisition] review.

Oil and gas majors have never sold as much or spent so little since 2004, Wood Mackenzie noted. BP led the selling pack, with its exit from TNK-BP the year's headline deal, whereas ExxonMobil and Shell are the only majors that could be considered active acquirers in 2012.

BP last month reported it would sell its stake in the Yacheng field in the South China Sea to Kuwait Foreign Petroleum Exploration Company for $308 million. The sale, expected to close in the second half of this year, will raise BP's total divestments to $37.8 billion.

ExxonMobil's proposed takeover of Celtic Exploration for $3.1 billion was approved by Celtic shareholders last month.

In 2012, upstream M&A activity totaled $232 billion, but that value was dominated by three deals in the second half of 2012. These deals include Rosneft's $58 billion acquisition of TNK-BP, which made it the world's largest publicly traded oil company by liquids production, CNOOC's acquisition of Nexen, the largest acquisition by a Chinese national oil company (NOC), and copper miner Freeport's return to oil and gas with the acquisition of Plains E&P for $17.2 billion. Excluding these deals, deal spending -although not a record high - was very strong at $138 billion.

"If we exclude deals of over $10 billion, deal spend was very strong at $138 billion but substantially lower than the record year we saw in 2010 of $178 billion. The number of M&A deals was also up year-on-year at 456, but fell slightly short of 2010's watermark of 466," said Luke Parker, manager of Wood Mackenzie's M&A service, in a statement.

The major oil companies' shift from net buyers to net sellers was one of four key themes Wood Mackenzie identified in the review. The other themes identified include:

  • Asian NOCs being significant buyers with $47 billion total
  • Continued high spending on North American unconventional oil and gas assets
  • A boom in liquefied natural gas-focused acquisition activity

Wood Mackenzie anticipates an uptick in M&A activity in 2013 due to the fact that major oil and gas companies have very strong balance sheets and cash flow.

"The Asian NOCs will continue to play their part, with a second wave of players looking to make up ground on their Chinese counterparts. For both groups, small to mid-size asset acquisitions focused on long-life resource themes will remain the focus," Parker commented.

Asian NOCs for the first time were the biggest spenders by peer group, with Chinese NOCs the largest spenders. While CNOOC made headlines with its Nexen acquisition, CNOOC, Sinopec and PetroChina spent more than $31 billion last year.

"Compatriot CNPC/PetroChina has yet to truly flex its muscles on the international stage: with enormous financial fire-power, 2013 might be the year in which it steps up activity," Parker said. "We expect NOCs to be M&A leaders again in 2013."

Unconventional M&A spending in 2012 totaled $45 billion, down 28 percent year over year. Oil deals outpaced unconventional gas deals for the first time, primarily due to interest in U.S. tight oil plays, while the U.S. shale gas M&A market collapsed.

Wood Mackenzie forecasts that tight oil-focused spending will continue will keep rising in 2013 as the scale of the resource ensures strong interest from a wide range of potential buyers, and a fragmented corporate landscape provides ample scope for consolidation, Parker noted. While the United States will see the vast majority of investment, Canadian tight oil M&A could grow as embryonic plays are proved up.

"We also believe Canadian shale will continue to attract interest as a feedstock for future LNG developments, whereas U.S. shale gas M&A is likely to remain relatively subdued," Parked added.

LNG M&A has boomed in particular for new supply sources such as unconventional gas in Australia and North America and deepwater resources offshore East Africa and Israel. But longer established LNG plays, especially in northwest Australia, have also seen significant deal flow.

"We fully expect the market for LNG assets will remain buoyant, with activity again concentrated on pre-development projects during 2013," said Parker.



Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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