Oil, Gas M&A in Upstream Sector Climbs to $37 Billion in 4Q 2014
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The total value of upstream oil and gas m&a deals, according to data from the Evaluate Energy M&A database, reached $37 billion in Q4 2014, a slight increase from the $35 billion total of Q3. However, the falling oil price would have resulted in a sharp decline in total deal value this quarter, had it not been for Repsol agreeing to acquire Talisman Energy for $13 billion at the beginning of December. This one deal represented a significant 35% of Q4’s total deal value and was the biggest E&P deal of the year.
Demand for Oil Assets Predictably Cools
The oil and gas industry was shaken by the continuing fall in global oil prices throughout the quarter. In September 2014, the West Texas Intermediate (WTI) spot oil price was still above US$90 but by early January this had fallen to US$50; company values as well as the value of oil assets began to crash.
The main impact on global E&P M&A of the falling oil price was that the demand for oil assets dropped significantly. For the first quarter in Evaluate Energy’s coverage of the upstream oil and gas M&A market, which began in 2008, there was not a single acquisition of an oil-weighted asset or company with a reported value of greater than $1 billion. Of course, with oil dropping below $50, a lot of discussion now surrounds deals for oil-weighted assets agreed before September that have not completed yet that could potentially be cancelled any time soon. This is all a major turnaround from a few months ago, when the focus was more on where the next “big” oil acquisitions would take place. Whiting Petroleum perhaps surprised some by completing its multi-billion dollar oil-focused acquisition of Bakken operator Kodiak Oil & Gas just before year end. However, as this deal was an all-stock transaction, the falling stock prices of both parties and the unchanged exchange ratio throughout the merger meant that Whiting and its shareholders were not really penalised for the timing of their acquisition, which was agreed when WTI was still above $90. Deals for oil assets that are heavily cash-weighted would be most likely to be cancelled or at least renegotiated if the oil price remains so low.
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