PWC: Value of oil, gas deals down

Deal values in the global oil and gas markets experienced progressive reduction throughout 2008 before plunging in the final quarter, PricewaterhouseCoopers LLP said in a recent study.

Mar 3rd, 2009

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Mar. 3 -- Deal values in the global oil and gas markets experienced progressive reduction throughout 2008 before plunging in the final quarter, PricewaterhouseCoopers LLP said in a recent study.

Rick Roberge, US energy transaction services partner at PWC, expects constrained debt markets, depressed equity prices, and depressed commodity prices to stall significant mergers and acquisitions during early 2009.

"While we believe the first half of 2009 will be subdued, any easing of the debt and equity markets combined with some positive movement in the price of oil is likely to herald a reawakening of deal activity," Roberge said.

"When the market returns, and the financial crisis has passed, the potential for a fast revival in commodity prices and deal making is there," he said.

In contrast to the decline in deal value, the number of global oil and gas deals soared to a record 969 in 2008, up 8.5% from 2007.

More deals of $500 million or less
PWC said the increased number of transactions stemmed from more transactions in the category of $500 million or less. Before the global economic crisis and significant decreases in oil prices, high-value transactions already were retreating, especially in the oil field sector, Roberge said.

"Total North American deal value fell 43% from $129.7 billion in 2007 to $73.6 billion in 2008," he said. "There were only 15 deals in 2008 worth $1 billion or more, compared to 31 in 2007."

Total global deal value in 2008 fell 38% to $180.4 billion, down from the 2007 high of $292.2 billion. Only two transactions topped the $5 billion mark in 2008, compared with 10 such deals in 2007.

Natural gas claimed the top spot, as six of the top 10 oil and gas deals last year involved purchases of natural gas assets, and five of the six were unconventional resources that require considerable technological investment.

All the gas deals were in Australia, the US, and Canada, reflecting the attraction of targets in stable locations close to end markets, as companies responded to security of supply constraints.

"The rush to develop Australian coalbed methane gas assets for [LNG] export helped catapult Australia's share of worldwide oil and gas deal value up tenfold," said Roberge. "Upstream deal value in Australia multiplied from $1.7 billion in 2007 to $16.6 billion in 2008."

Contact Paula Dittrick at paulad@ogjonline.com.

More in General Interest