M&A activity rises among UK-based oil, gas firms

Mergers and acquisitions among UK-listed oil and gas companies soared by more than 70% in the last year, according to law firm Freshfields Bruckhaus Deringer LLP.

Uchenna Izundu
OGJ International Editor

LONDON, Mar. 11 -- Mergers and acquisitions among UK-listed oil and gas companies soared by more than 70% in the last year, according to law firm Freshfields Bruckhaus Deringer LLP. The rise could indicate larger players' desire to acquire smaller operators, now struggling to access capital.

Oil prices dropping more than 60% since the peak of $147/bbl in July 2008 diminished the value of oil and gas firms, and opened cheaper deals for those who are cash rich enough to weather the downturn.

FBD said the level of M&A activity in the UK rose despite the slowdown in pace of global M&A deals. The value of these transactions involving London Stock Exchange-listed companies leapt by 183% to £2.1 billion in 2008. In volume terms they rose to 52 deals, representing a rise of 73%.

"Somewhat against the grain of what we have seen in UK and global M&A as a whole, activity levels within the oil and gas sector involving London-listed companies in particular have been decidedly busier and look set to become even more intense throughout 2009," said Simon Marchant, a corporate partner at FBD and head of the firm's energy and natural resources group.

Marchant noted that those "taking a longer view may well conclude that supply side constraints on production mean that the sector is now ripe for opportunistic acquisitions by cash rich competitors with strong balance sheets who can achieve cost and revenue synergies."

In 2008, the industry's global M&A deals increased by more than 51% on the previous year. However, they fell by 18% in value terms to £146 billion.

Last August, Jarpeno Ltd., the investment vehicle of India's Oil & Natural Gas Corp., bought Imperial Energy Corp. PLC for $2.6 billion—the largest deal in the UK.

Contact Uchenna Izundu at uchennai@pennwell.com.

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