Oil and Gas M&A in 2011 - Volume Up, Values Down

LONDON, Jan. 20, 2012 /PRNewswire/ -- 1322 oil and gas transactions were announced in 2011, an increase of more than 5% when compared to 2010 proving that this remains one of the most resilient global sectors for mergers and acquisitions.

The aggregate value of oil and gas transactions in the year totalled US$317b. The 2011 deal value was about 7% below last year's US$341b, largely as a result of a lack of mega deals. In 2010, there were 76 oil and gas transactions valued in excess of US$1b; in 2011 this figure had declined to 71.

Andy Brogan, Global Leader: Oil & Gas Transaction Advisory Services at Ernst & Young, commented: "The oil and gas market has proved that it can adapt to higher levels of uncertainty and keep transacting. The key questions now are how it will cope with the combination of commodity price volatility and structural contraction in global debt capacity."

The upstream segment remained the most active, representing 72% of total deal volumes. North America, accounting for 562 deals or 43%, remained the most active market, although the strongest growing regions were Europe and the CIS, reflecting resurging interest in these regions.

With US$66b targeted on shale related transactions, unconventional is rapidly emerging as the new conventional. Although most of the deal activity has been in North America, China is the largest shale gas resource holder in the world, with 19% of global resources. If the potential in this asset base can be unlocked, this could transform the oil and gas landscape in years to come.

Activity in the downstream segment declined modestly during 2011, although overall values were comparable to 2010 levels. Ownership change in refining and retail in mature markets continued stemming from ongoing portfolio rebalance and capital allocation reviews amongst the majors. "Downstream activity will continue but may be more concentrated in storage and midstream rather than refining." comments Brogan.

Oilfield services companies, like their customer base, are globalizing and consolidating. Many of the larger players are well-capitalized and opportunistic, and financial players also remain active. As a result, the segment saw an increase in deal activity in 2011 and there is a positive outlook for 2012 underpinned by those seeking new geographies, new customers or new technologies.

Brogan concludes: "We anticipate that transaction activity will continue into 2012 but will be affected by wider economic volatility. As ever, high quality upstream assets will attract buyers and good midstream assets will too.  Downstream, the components of the sector most heavily exposed to the global economy's problem areas, will find transactions harder to finance and therefore to close. Winners will need to manage risk, volatility and capital across a global political landscape."

2011 Global Oil & Gas Transactions Review Webcast

Date: Tuesday, 24 January 2012
Time: 9:00-10:00 New York; 14:00-15:00 London

Registration: To register for this webcast please click here.

Join Ernst & Young's Global Oil & Gas Transaction Advisory Services Team as we launch our report into transaction activity in 2011 and share our outlook for 2012.

This well-followed annual publication offers insights around each of the key sub-sectors of the industry - upstream, downstream and oilfield services - along with specific regional insights for many of the key global regions for Oil & Gas, such as Australia, South Asia, CIS, Europe, Africa, and the Americas.

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

How Ernst & Young's Global Oil & Gas Center can help your business

The oil and gas industry is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. Ernst & Young's Global Oil & Gas Center supports over 9,000 oil and gas professionals with technical experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oilfield service sub-sectors.

The Center works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant key industry issues. With our deep industry focus, we can help your organization drive down costs and compete more effectively to achieve its potential. For more information, please visit www.ey.com/oilandgas.

SOURCE Ernst & Young

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