The UK is well placed to benefit from new frontiers for oil and gas activity, energy research company Wood Mackenzie said yesterday.
Announcing likely major themes for international upstream mergers and acquisitions (M&As) during 2011, the firm said the market would be driven by unconventional plays, continued aggressive spending by state-owned oil companies (NOCs) and restructuring after last year’s disaster in the Gulf of Mexico.
According to WoodMac, the global upstream M&A market returned to peak levels last year as firms struck deals worth more than £115billion.
Luke Parker, the Edinburgh-based consultant’s lead analyst, said healthy activity towards the end of 2010 boded well for this year.
Deals late last year included the £1.7billion takeover of Aberdeen-based Dana Petroleum by the Korean National Oil Company and Wood Group’s £606million acquisition of smaller rival and fellow Granite City company PSN.
Mr Parker said the biggest driver of M&A activity in 2010 was unconventional resources – more technically challenging and often geographically remote – and this was likely to continue this year. He added: “The market in 2010 was underpinned by a steady stream of mid-sized deals, with 20 in the $1billion to $5billion (£630million to £3.15billion) range, whereas 2009 was dominated by two mega-sized deals.”
Suncor’s acquisition of Petro-Canada for more than £10billion and ExxonMobil’s purchase of shale-gas producer XTO Energy for about £18.5billion overshadowed all other M&A activity in 2009.
WoodMac said interest in US shale gas accounted for 21% of all deals last year, while Canada’s oil sands also proved popular.
NOCs were net buyers and industry supermajors were net sellers during 2010, Mr Parker said, adding: “The NOCs were almost exclusively acquisitive.”
WoodMac said the impact of the Gulf of Mexico oil spill was among the most uncertain factors behind upstream M&A prospects in 2011.
Mr Parker added: “We believe that much will depend on the regulatory and legislative fall-out, which will take time to materialise. On balance, Wood Mackenzie anticipates that smaller players will scale down deepwater exposure, while bigger players will consolidate. For the time being, the vast majority of operators maintain a wait-and-see approach.”