Bucharest , 21 Mai 2007 |
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| Record cash flows have pushed deal activity in the oil and gas industry to levels rivalling the mega merger highs of 1998. ‘O&G Deals’ the first annual analysis by PricewaterhouseCoopers of Mergers & Acquisitions activity in the oil and gas sector, reports that average deal value in the sector rose 18% in 2006 pushing the aggregate M&A total to US$291bn, up US$41bn (around 16%) on the previous year. |
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| Alexandru Lupea, Partner with PricewaterhouseCoopers Romania said: |
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“For a number of years we witness an un-precedented increase of the oil and gas transactions – mostly due to the rising energy demand, higher oil price, the exploration of unconventional sources and increasingly complex geopolitics. |
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PricewaterhouseCoopers positions itself more and more often as a key advisor working with clients in oil and gas sector. ‘O&G Deals’ Report is providing an overview of this burgeoning sector by examining the most important global deals.” |
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| Gas deals dominated the list of the largest transactions in 2006, with six out of the eight upstream deals in the top ten deal list. This was in contrast to the previous year when only two deals in the top ten of all deals and four of the top ten of upstream deals were gas dominated. |
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| Unlike in the past, it is not the majors that are fuelling much of the deal momentum. Instead, the report points to four key drivers of deal activity: |
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Accelerated consolidation among mid-size companies – mid-size deals accounted for half of |
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the total increase in deal value. Consolidation in this part of the market is running apace. 2006 saw a 59% leap in mid-size deal numbers and a 61% in total mid-size deal values which jumped from US$36.3bn in 2005 to US$58.3bn in 2006. |
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The ascendancy of the NOCs (state owned oil companies) – the rise of NOCs from Russia, |
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China and India continues. In the case of the latter two countries this is demonstrated by recent investments abroad, for example CNOOC’s US$5bn deal to develop Iran's northern Pars gas field. In the case of Russian NOCs, principally Gazprom but also Rosneft, exploring opportunities abroad is combined with a strengthened hold on upstream assets at home, highlighted by the US$7.5bn deal to gain majority control of the massive Sakhalin 2 project and the take-over of Yukos assets. |
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A boom in oil services activity - worldwide shortages of personnel and equipment is spurring |
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deal activity in the services sector. Indeed, in 2006, there were no fewer than six US$1bn plus deals in this segment of the industry compared to just two in 2005. Total service company deal values leapt 132%, from US$5.6bn in 2005 to US$12bn in 2006. |
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The appetite of private equity - private equity players, leveraged buyout funds and hedge |
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funds have begun to move into the oil and gas sector in a significant way, armed with big investment cash piles and spurred by the opportunities presented by an era of higher prices. |
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| Momentum will also continue to come from the oil and gas services sector which looks set to remain buoyant. Oil service companies have experienced recent high profit and share price growth and further consolidation can be expected as these companies continue to pursue acquisition-led growth. |
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| The report also includes a focus on each of the key regional markets: |
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North America - the total value of oil and gas deal activity in North America leapt by 40%, |
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from US$118bn in 2005 to US$164.7bn in 2006. The total number of deals remained the same but the number of large deals, worth US$1bn or above, increased from 21 to 32. |
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With companies facing growing competition on the international scene, 2006 saw renewed interest in, till now, more marginal oil and gas reserves, in particular the Canadian oil sands. Rather than sink additional money into high-growth, but politically risky, areas, some oil majors are directing more attention to US small-majors and the Canadian oil sands, where reserves can be acquired with less risk, but at a higher price. |
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Europe - deal totals in Europe remained buoyant. The aggregate total was given a huge boost |
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by Statoil/Norsk Hydro’s US$32.2bn upstream merger as well as a US$3.6bn surge in the value of oil field service deals. Excluding the effect of the Statoil/Norsk Hydro deal and its counterpart highest deal in 2005, the average value of the remainder of the European deals rose 22%, from US$137m to US$167m. By far the biggest increase came in the oilfield services sector where the average deal size more than doubled, from US$109m to US$269m. |
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Russia and the Commonwealth of Independent States - deal levels remained at significant |
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levels in Russia and neighbouring CIS countries, totalling US$30.1bn in 2006. There was an upswing in the number of deals valued at US$1bn or above with eleven such deals announced in 2006 compared to four the previous year. |
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Asia Pacific - 2006 deal totals fell far short of their 2005 highs in the Asia Pacific region. |
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However the overall figures mask some significant exceptions, notably activity in China, Australia and in oil field services |
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