Global M&A activity for upstream oil and gas deals in 2011 totaled $170 billion in 726 deals, according to a new report.
The report from PLS, Inc. in conjunction with international partner Derrick Petroleum Services, includes all upstream oil and gas deals with values disclosed.
"Total deal value in 2011 dropped 19 percent from 2010 record levels, yet the number of deals increased 15 percent to a record of 726,” said Ronyld W Wise, president of Houston-based PLS, Inc.
“The relative strength of WTI and Brent oil prices, which averaged $95 and $111 per barrel respectively, provided good fundamentals for both buyers and sellers to execute the deals. Activity in 2012 is expected to remain at a healthy pace as the industry continues to deploy large amounts of capital toward production development. Currently, we tally over $100 billion of assets on the market."
The buyers are dominated by international interests seeking to shore up longer term supply by investing in both proven conventional reserves worldwide and unconventional plays in the North America.
Yashodeep Deodhar, managing partner, Derrick Petroleum Services, aptly points out, "The Chinese dominance in buying global oil and gas assets is highlighted by the fact that Sinopec has been the number one cash acquirer over the last three years, spending more than $35 billion between 2009 and 2011 to build a truly global footprint.
“Sinopec's cash was welcome in large capital intensive projects such as Repsol and Galp's pre-salt developments offshore Brazil and ConocoPhillips and Origin Energy's APLNG project in Australia.
“With continued healthy cash generation ($7.3 billion in H1 2011), Sinopec is expected to continue major acquisitions of global oil and gas assets, likely within unconventional shale plays worldwide, in countries such as the United States, Argentina and Poland. Today's announcement of Sinopec's $2.5 billion joint venture with Devon in five US new venture plays is evidence of Sinopec's continuing acquisition strategy."
While the number of deals slowed in late 2011 due to uncertainty in the world financial markets, deal values in Q4 2011 set the high mark for the year. Highlights of Q4 2011 include KKR and partners' $7.2 billion acquisition of Tulsa-based privately held Samson Investments, Kinder Morgan's acquisition of El Paso ($7.2 billion attributed to the oil and gas assets included in the deal) and Statoil's $4.7 billion purchase of Brigham Exploration.
Looking forward, PLS and Derrick both expect the market for oil and gas assets to continue at a healthy pace driven in part by onshore North America's remarkable transformation from exploration, to exploitation to today's "manufacturing process," a technology that requires significant capital for full development of the resource.
Globally, growing Asian economies are expected to continue to drive deal activity as buyers seek new oil and gas reserves and provide capital for world class exploration plays in areas such as West Africa, East Africa and Brazil deepwater.
