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Record year for global oil and gas transactions in 2012

Friday, Jan 25, 2013

LONDON, Jan. 24, 2013 /PRNewswire/ -- Withan average of more than four transactions announced every day in 2012, the oil and gas sector has remained one of the most active global sectors for mergers and acquisitions. According to Ernst & Young's Global oil and gas transactions review, oil and gas transactions recorded a staggering US$402b in 2012, representing a 19% increase compared to 2011 (US$337b). Ninety-two transactions exceeded US$1b in value compared to just 71 in 2011. This was despite a marginal decrease in oil and gas transaction volumes from 1,664 deals in 2011 to 1,616 in 2012.

Oil and gas transactions activity by segments

Upstream remained the most active segment with US$284b worth of transactions accounting for 71% of total deal values. North America continued to be the most dominant region for activity, accounting for approximately 52% of the upstream transactions volume. However, within North America, transaction volumes were supported by a rapidly growing Canadian deal market whilst the US market contracted.

Andy Brogan, Ernst & Young's Global Leader Oil & Gas Transaction Advisory Services comments:

"2012 saw a continuation of trends we have seen for the last few years supported by a relatively benign oil price environment.  The increase in the number of larger deals was a function of more capital becoming available to the right class of buyer together with increased pressure from asset and company owners to crystallize returns."

Transactions values in the downstream segment were flat at US$42b, with volumes also fairly stagnant at 162 transactions (6% lower than 2011). The decline is particularly evident in the US and South America, where transaction volumes have reduced by eight and seven transactions respectively.

"Companies remain cautious in mature markets due to the continuing downside risks for oil product demand, driven by the uncertain economic outlook and austerity measures. Storage facilities that deliver global connectivity and trading potential remain attractive to acquirers, with conversion of refining facilities also being considered," continues Brogan.

In contrast, transactions volumes in Asia have increased by nine transactions as demand for oil products continues to surge in the region.

The number of transactions in the midstream segment in 2012 decreased by 19% from 111 in 2011 to 90 in 2012. The reported deal value decreased significantly, from US$87.3b in 2011 to US$50.3b in 2012 due to the absence of a blockbuster deal such as Kinder Morgan's acquisition of the El Paso group. North America accounted for 78% of all midstream transactions, but this was a decline from the 83% dominance of the region in 2011. Midstream activity levels will likely continue to increase outside of North America as infrastructure ownership further disaggregates from upstream assets, driven by capital allocation and regulatory factors.

Oilfield services fastest-growing segment for a second year

The fastest-growing segment for transaction volumes was oilfield services, repeating last year's healthy growth. Total oilfield service volume of 212 deals was up almost 10%. The aggregate deal value in 2012 dropped by a third to US$26b, reflecting the absence of deals with scale comparable to the US$8.7b Ensco-Pride merger of 2011.

SOURCE Ernst & Young

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