Oil & Gas M&A to ramp up in 2016

Baku, Azerbaijan, Jan. 6

By Khalid Kazimov - Trend:

In contrast to 2015, upstream oil and gas deal activity is set to ramp up this year regardless of what happens to the oil price, according to Wood Mackenzie's M&A outlook for 2016.

"Should oil prices stay low, companies will be forced to sell assets and merge businesses: to free up capital, to cut costs and to survive amid growing financial pressures. However, assuming oil prices recover in 2016 - which Wood Mackenzie forecasts will happen later in the year, with Brent rising to over US$65 per barrel in Q4 - companies will move quickly to catch the next up-cycle and re-focus from survival to growth," Wood Mackenzie added.

The global energy, metals and mining research and consultancy group's analysis shows that 2015 was the slowest year for oil and gas M&A in over a decade. Average monthly deal count fell by over a third, compared with the preceding 24 months. Excluding Shell's exceptional US$82 billion takeover of BG, deal spend collapsed by two thirds; only fourteen deals higher than a billion-dollars in value were announced, compared with 46 in 2014.

Luke Parker, Corporate Analysis Research Director for Wood Mackenzie explains; "Uncertainty over oil prices continued to drive a wedge between buyers and sellers, sustaining a slowdown in activity that began in October 2014. With long-term oil prices so fundamental to the success or failure of M&A, and costs still in the process of re-setting, most were reluctant to commit to company-changing deals.

"Whether oil prices move up, down or nowhere at all in 2016, pressure to act will build, on both buyers and sellers. Exactly how the M&A market recovers will depend on how oil prices move in 2016, and where people expect they will move to beyond that," Parker adds.

"Should the current pricing gloom persist, we expect that deal flow will increase in 2016. The drivers behind deals, and the types of deals we see, will differ this year as potential sellers come under increasing financial pressure," Mr Parker continues. "Mounting distress will force more companies to market: balance sheets will become ever more stretched without asset sales to balance the books. Financing options will be more limited: debt and equity investors are unlikely to be as welcoming as they were in H1 2015, when expectations were for a quick rebound in prices."

Wood Mackenzie also warns that the number of vulnerable players is likely to increase: "While the top tier of International Oil Companies (IOCs) can largely take action to ride out a further year of low prices, the next tier down may have fewer options. Deeper strategic action, including asset sales, will be needed," Mr Parker explains.

Greig Aitken, Principal Analyst - M&A for Wood Mackenzie, adds: "Assuming oil prices stay low, we can expect more corporate consolidation and more deals focused on cost cutting and operational synergies. The ability to drive the pace of capex spend will be critical to companies needing to protect financial strength. Expect swaps and acquisitions based on taking operatorship of assets. In some cases, controlling the pace of spend will not be sufficient; living within cash flow will be the priority for E&P companies and some capital intensive development assets will have to be sold, almost regardless of price."

Wood Mackenzie sees the oil market tightening next year, boosting prices in H2. This scenario would also prove a boon to M&A activity. "As we saw in Q2 2015, when sentiment takes hold that oil prices are on the path to recovery, M&A activity can pick-up quickly. First mover advantage is key - securing deals before competition grows and inflation sets in. At the moment, companies are focused on survival, but this could quickly shift back to growth, in a higher oil price environment," Mr Aitken says.

In terms of likely buyers, Wood Mackenzie highlights the private equity sector as being well positioned for counter-cyclical opportunities. As Mr Parker explains: "Reports last year suggested that private equity had anywhere between US$40 billion and US$100 billion of funds earmarked for investment in oil and gas. Much of the capital available to this group was raised specifically to take advantage of the opportunities that would arise in the low oil price environment. 2015 yielded fewer opportunities than anticipated. However 2016 should provide more and private equity is still well-capitalised to take advantage."

Armenia threatens not only Azerbaijan's energy security - energy minister
Armenia threatens not only Azerbaijan's energy security - energy minister
Azerbaijan Deposit Insurance Fund compensating thousands of closed banks' clients
Azerbaijan Deposit Insurance Fund compensating thousands of closed banks' clients
Renewables to play key role in energy sector's dev't, Iranian expert says
Renewables to play key role in energy sector's dev't, Iranian expert says
Loading Bars
Latest
Iraq reports 4,043 new COVID-19 cases, 463,951 in total
5.6-magnitude quake hits 56 km WSW of Changuillo, Peru
France and Germany plunge back into lockdown as second COVID-19 wave sweeps Europe
Iran has condemned occupation of Azerbaijani territories from very beginning - Iranian Deputy Foreign Minister
Iranian-Azerbaijani relations have developed rapidly in recent years - Azerbaijani president
If Armenia does not withdraw from rest of occupied territories of its own free will, we will drive them away from there as well - President Ilham Aliyev
UNICEF makes statement on Karabakh conflict calling on to protect children
Iran is next to people and state of Azerbaijan - special representative of Iranian President
Karabakh conflict must be resolved within territorial integrity of Azerbaijan - Special Representative of Iranian President (EXCLUSIVE)
Armenia should know that no provocation can hinder Azerbaijan on its way to victory - MoD
Pakistani ambassador condemns Armenia's attack against civilians in Azerbaijan's Barda
Manpower of Armenian Armed Forces destroyed (VIDEO)
Management of Azerbaijani Emergency Situation Ministry arrive in Barda
Azerbaijani artillerymen destroying Armenian troops' manpower (VIDEO)
Armenian troops firing at Azerbaijani civilian population destroyed with precise fire (VIDEO)
Azerbaijani FM holds telephone conversations with OSCE Minsk Group Co-Chairs
First Vice-President Mehriban Aliyeva: Such barbaric attacks show that atrocities of Armenians have no limits (PHOTO)
President Ilham Aliyev receives delegation led by Special Envoy of Iranian President (PHOTO)
Azercell stands by people in Barda!
Pakistan’s National Assembly adopts resolution condemning Armenian aggression
Armenian leadership acts as if it lost its mind - Turkish Foreign Ministry
Azerbaijani FM, US deputy secretary of state hold phone talks
Armenia threatens not only Azerbaijan's energy security - energy minister
Freedom of speech suppression by Armenian lobby in France unacceptable - analyst
Azerbaijan provides footage of Armenian troops, military equipment being destroyed (VIDEO)
Ministry of Emergency Situations staff among civilians killed in Azerbaijan’s Barda
Natural gas supplied to village of Khulo of Georgian Adjara
Turkmen FM takes part in second session of India-Central Asia Dialogue
Children among dead, wounded in Azerbaijan’s Barda due to Armenian terror - chief physician
Armenia responsible for death of Azerbaijani civilians - Turkish presidential administration
Armenians think shelling of cities will force Azerbaijan to end war - Russian expert
Iran unveils volume of loans issued to Golestan Province
Azerbaijan destroys Armenian troops (VIDEO)
Azerbaijan expands list of settlements banned with entry-exit due to COVID-19
'Reporters Without Borders' condemns Armenian online attacks against French TV reporter
SOCAR Turkey may evaluate operational partnership for Aliaga port terminal
Shelling of residential areas in Barda once again exposes Armenia's terrorist nature - MFA
Uzbekistan expects GDP to grow in 2021
State budget of Georgian Adjara to up in 2021
Turkey says export of domestic mining products to Georgia down
Iran’s Bahar Azadi gold coin price starts to fall
Missile attack on Barda once again proves terrorist essence of Armenia - Turkish MoD
President Ilham Aliyev: Blood of Barda residents will not remain unavenged, aggressors will be given decent rebuff on battlefield
Tethys reveals 9M2020 production results at Upper Aptian on KBD-02 sites
Turkmenistan remains main gas exporter to China
France raises import of mining industry products from Turkey in September
Azerbaijan extends special quarantine regime
Iran strongly condemns Armenia's missile attack on Azerbaijan's Barda
Iran's budget reliance on oil sale declines
President Ilham Aliyev: Azerbaijani Army liberated 13 villages of Zangilan, Fuzuli, Jabrayil and Gubadli districts
Azerbaijan Deposit Insurance Fund compensating thousands of closed banks' clients
U.S. goods trade deficit shrinks in September
Amount of licenses issued for setting up enterprises in Iran’s Bushehr Province grow
Renewables to play key role in energy sector's dev't, Iranian expert says
Armenian Army, inept as to collaborate with PKK, slaughtering Azerbaijanis - Turkish Ministry of Defense
Georgian GDG Group to open wine factory in 2021
Georgian metallurgical company Rustavi Poladi sees increase in its income
Uzbekistan, Turkey develop military cooperation
Georgia’s Innovation and Technology Agency provides access to finance for innovative project
Uzbekistan, Tajikistan postpone flights resumption date
Servicemen of Azerbaijani Internal Troops urgently sent to Barda
Armenia does not seek to resolve Karabakh conflict peacefully - US military expert
Industrial gas flow obtained at exploration wells in Uzbekistan
Armenian Armed Forces again fire at Azerbaijan’s Tartar by using Grad multiple rocket launchers
Morocco lowers defense products' import from Turkey
Volume of loans issued to manufacturing enterprises in Iran’s Bushehr Province revealed
Azerbaijan drafting laws on gas supply, energy
EAEU countries export large various fabrics to Turkmenistan
Iran enlarges value of exports from Malayer customs
Azerbaijan confirms 340 more COVID-19 recoveries
General Prosecutor's Office gives update on number of victims as result of missile strike on Azerbaijan’s Barda (PHOTO)
If Armenia continues to attack civilians, Azerbaijan to take adequate measures - Assistant to president
Using mosque in Azerbaijan's Zangilan as pigpen is insult to Muslims - Culture Ministry
Romanian expert says digitalization of economy to improve security of EU's energy system
Armenia used cluster munitions to inflict excessive casualties among civilians in Barda - assistant to Azerbaijani president
Kazakhstan's import from Lithuania increases amid COVID-19
Armenian military group annihilated after failed sabotage attempt in Azerbaijan's Zangilan (VIDEO)
Armenian Armed Forces shelling Azerbaijan’s Tartar again
Azerbaijani Armed Forces take revenge for Barda (VIDEO)
By disseminating disinformation, Armenia trying to divert attention from its war crimes
Azerbaijani Ministry of Emergency Situations continues search, rescue operations in Barda
Uzbekistan’s 9M2020 export of textile products up
Cluster bomb attacks are new act of genocide against Azerbaijani people - President's aide
Azerbaijan eyes increasing private investment in renewable energy sector - minister
Latest situation in Azerbaijan’s Barda as result of Armenian terror (VIDEO)
Branch of Russia's Tatneft in Turkmenistan opens tender for installation work
Georgia to build anchovy fishing boat in Turkey
National Bank of Georgia decides to keep refinancing rate unchanged
Assistant to president invites military attaches to visit Azerbaijan’s Barda
Unprecedented number of people apply to participate in Produce in Georgia program
Georgian Natenadze’s Wine Cellar company resumes exports of wines
Armenia's attacks on Azerbaijani settlements - attack against civilized world - Assistant to president
Auction for placing Azerbaijani CBA's short-term notes held
Azerbaijan invites Human Rights Watch, Amnesty International to conduct on site assessment of Armenian crimes - top official
Iran reveals COVID-19 data for October 28
Serious environmental crimes committed in occupied territories of Azerbaijan must be immediately stopped
Missile attack on Azerbaijan’s Barda - crime against humanity – Foreign Ministry
Transition to clean energy in Azerbaijan becomes essential - ECO's Secretary General
Azerbaijani FM meets Deputy FM of Iran
Turkey's export of mining industry products to China up in September
All news