The value of deals in the worldwide oil and gas industry reduced progressively throughout 2008 before slumping in the final quarter of the year following the dramatic dip in oil prices, according to a new report.
Oil & Gas Deals, an annual report by professional services firm PricewaterhouseCoopers (PwC), says companies slammed on the brakes in the final quarter with total oil and gas deal value down 59% on 2007 levels and 72% compared with the final quarter of 2006.
The report says the immediate outlook for oil and gas deal-making in the early part of this year is bleak.
However, while deal activity in the first half looks set to remain subdued, it is difficult to see stronger players staying on the sidelines for the whole of 2009 given the opportunities for acquisitions at low valuations, it adds.
Alan Barr, of PwC’s transaction services in Aberdeen, said: “The current market offers unrivalled opportunities for companies to gain access which, in other circumstances, would be denied to them. Similarly, sovereign wealth funds and many private equity investors will be watching the sector closely. Falls in value are creating compelling acquisition opportunities.”
Sara Miller, of PwC corporate finance, said: “We are certainly seeing a slowdown in Aberdeen, as oil prices remain low for the time being and funding remains tight.
“For those with cash to spend, now is the perfect time to buy. The oil price is likely to rise again and the fundamentals of many Aberdeen businesses remain strong, so buying now at a low price is a very attractive prospect.”
The report concludes that constrained debt markets, depressed equity prices and low commodity prices look set to stall significant deal-making in the early part of 2009.
The PwC report shows large falls in mergers and acquisitions activity in Russia and the US in 2008 compared to the year before.
Activity in Europe was relatively resilient compared to the big fall in volume elsewhere. Deal numbers in Europe rose 64% year-on-year from 78 to 126 but the total deal value was down 15% to £10.55billion; compared to a 38% drop worldwide to £124.4billion.
Meanwhile, deal value in the Asia Pacific region shot up by 73%, driven by deals to acquire Australian gas assets.
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