KPMG Sees Opportunities in Current Oilfield Services Market
Plenty of M&A opportunities remain within the oilfield servcies market in spite of the low oil price, professional services firm KPMG said Monday.
KPMG Head of Oil and Gas Mergers and Acquisitions Dane Houlahan believes that although uncertainty over the price of oil has created challenges in relation to valuations, investors with experience of the sector could line themselves up for future profit by buying in the current market.
Houlahan commented in an analyst statement:
"There will still be strategic deals happening as the industry reorganizes, although the nature of the transactions and M&A [Mergers & Acquisitions] processes will be very different to the wider, aggressive bull market auctions we were used to seeing in 2013 and early 2014. Trade buyers and specialist investors who understand the cyclical nature of oil and gas will see this as a great time in the market to be acquiring.
"Forecasting and agreeing transaction pricing at the moment is particularly difficult and is the big stumbling block on many deals, although we would expect this to improve as the market stabilizes. Finding an absolute consensus view at the moment is difficult. Clearly a lot will depend on the oil price but the key message from the North American market seemed to be some expectation that by the first quarter of next year we might see sufficient stability back in the market to drive some additional M&A activity. Assuming that’s the case, we would expect that to translate into increased European and rest of world deal flow in due course."
Oil and gas analysts at Jefferies International Limited believe that de-risked reserves play a vital role in the current M&A sector.
"Deals continue to show that M&A only happens at real value for de-risked reserves…Value of de-risked reserves combined with strategic rational is a constant in 17 Corporate M&A deals stretching back to 2008...This may seem a simplistic argument, but to us it makes clear sense. Industry weighs the cost of bringing through production versus the access to barrels. The exploration, appraisal and even development risk included in a premium trading metric is a tough acquisition hurdle to justify across the board table," Jefferies International analysts said in a brief statement.
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