Energy Deals Elusive Despite $110B in Assets on the Block

"People are still looking at the macro: (oil) inventories are still very high, U.S. unconventional production is slowly coming down but is still stubbornly high and people will want to see that before the industry believe the recovery is taking place."

Closing Gap

While volatility heightens caution among both buyers and sellers, the rally and signs of slowing global production appear to confirm expectations of a recovery by the year-end, bolstering dealmakers' confidence, according to some analysts and bankers.

"The valuation gap is closing. If prices stay in the $40-$70 band it will not change people's fundamental expectations on where the market is going," said Andy Brogan, Global Oil & Gas Transactions Leader at consultancy EY. "A number of people are looking very seriously at buying assets so (volatility) doesn't seem to be stopping an uptick in processes."

Nevertheless, a major movement on the market could still upset things, he added.

In a survey of industry executives conducted by EY, 88 percent said they had failed to complete or cancelled a planned acquisition over the past year. But 58 percent expect the deal market to improve over the next 12 months.

BP, like its peers, has announced large sale programmes to offset growing debt while maintaining a generous dividend policy.

BP Chief Financial Officer Brian Gilvary said last month that the group was also looking at buying, preferably assets it can operate, but noted the difficult conditions.

"It is tough to find things which are value accretive in the current market and there are lots of assets out there right now," he said in a call to analysts following BP's first quarter results. BP is also considering swapping assets, he added.

Shell's plan to sell $30 billion of assets by 2018 following its $50 billion acquisition of BG Group in February is the most ambitious in the market.

(Additional reporting by Amanda Cooper; editing by David Stamp)