IHS: Chinese NOCs dominated M&A deals in 2013

Jan. 2, 2014
Led by the Chinese, Asian and Caspian regional national oil companies purchased half of the 10 largest deals globally in 2013, according to IHS research on energy mergers and acquisitions.

Led by the Chinese, Asian and Caspian regional national oil companies purchased half of the 10 largest deals globally in 2013, according to IHS research on energy mergers and acquisitions.

Meanwhile, oil and gas companies elsewhere shifted their focus in 2013 to developing inventories of previously acquired reserves, resources, and acreage, resulting in the nearly halving of transaction value for global oil and gas M&A deals to $136 billion—the lowest level since the 2008 recession.

IHS said the worldwide deal count dropped by 20% from a 10-year high in 2012 of more than $250 billion. However, after a sluggish first-half 2013, deal activity ramped up in the second half.

Growth in exploration and development spending brought total global upstream capital investment up 10% from 2012.

IHS noted the number of worldwide asset transactions fell nearly 15%, while the corporate deal count dropped 50%. After several large corporate takeovers of more than $10 billion in 2012, no corporate mergers surpassed $5 billion in 2013.

According to IHS, offshore and conventional onshore resources gained global M&A market share in 2013 with offshore transactions accounting for four of the 10 largest deals.

However, spending on unconventional deals plunged by more than half in 2013, to $40 billion.

“Following record-setting purchases of more than $200 billion on unconventional resources during the prior 3 years, varied drilling results in emerging North American basins made buyers more cautious in 2013,” said Christopher Sheehan, director of energy M&A research at IHS.

“In particular, overseas firms reduced their cross-border purchases, and oil and gas companies concentrated on exploiting the best performing areas of their vast development inventories,” Sheehan added.

Reduced North American activity

While Devon Energy Corp.’s $6 billion acquisition of Eagle Ford assets from GeoSouthern Energy Corp. marked the largest global transaction in 2013 (OGJ Online, Nov. 20, 2013), total US transaction value fell to a 5-year low in 2013 as corporate deal value hit a 10-year low, IHS found.

Unconventional resources represented half of the 10 largest deals in the US, while they were the primary target in only one of the top 20 largest global transactions.

The natural gas percentage of acquired US reserves for the year hit a 10-year low because of persistently low gas prices. Activity in the US primarily occurred in the Midcontinent, onshore Gulf Coast, and Rocky Mountain regions.

Just three of the 20 largest deals in 2013 came from North America, whose market share of worldwide transaction value fell to less than 45% from 50% in 2012, as buyers sought access to prolific international discoveries, IHS noted.

Around the world

Transactions in West and East Africa more than doubled the market share of the Africa and Middle East region to 15%. Spending in Latin America increased to 7%.

For the second consecutive year, the Russia and Caspian region represented more than 25% of global total transaction value, as Rosneft continued to expand its domestic holdings.

The combined value of transactions in Canada, Europe, and Asia comprised more than 15% of the global total, almost half of the percentage the three comprised in 2012.

The oil and liquids percentage of acquired proved reserves in North America and proved plus probable reserves outside North America, excluding the Russia and Caspian region, both remained near a 10-year high.

Total transacted 1P and 2P reserve volumes fell steeply as there were no transactions in 2013 that approached the previous year’s $60 billion purchase of Russian producer TNK-BP by Rosneft.