Following two years of decline, global upstream merger and acquisition (M&A) transaction value increased 40% in 2009, to just less than $150billion, according to the HIS Herold annual Global Upstream M&A Review.
Deals in North America accounted for a record high two-thirds of the $150billion recorded for 2009, versus 50% of 2008’s tally.
However, while the number of transactions in Europe dipped slightly from the record total in 2008, the total was still the second highest in 10 years. The market was mostly driven by European utilities and diversified energy companies targeting regional gas supply – companies such as Centrica and RWE-Dea.
Overall, the number of deals outside North America increased for the third consecutive year to an all-time high as companies sought to build oil reserves by accessing world-class discoveries and acquiring small companies exploring in frontier regions.
The dramatic increase in value was propelled by the two largest corporate takeovers since 2006: ExxonMobil’s $41billion acquisition of XTO Energy and Suncor Energy’s $21billion merger with Petro-Canada, a transaction that involved UK Continental Shelf assets.
A spate of deals by national oil companies (NOCs) and international oil companies (IOCs) jockeying over vast resources in Africa and other international regions also drove the increase, including more than $15billion spent by Chinese state-owned entities.
Indeed, Africa fuelled international M&A deal growth last year as the region represented nearly 10% of global deal value and more than 25% of transaction value outside North America in 2009.
Corporate acquisitions comprised 70% of worldwide deal value in 2009 and accounted for the five largest transactions, although the total corporate deal count held flat near a five-year low. National oil companies were buyers in four of the 10 largest deals, led by Asian NOCs expanding global upstream holdings in Africa, Canada and the FSU.
Turning to the outlook for the current year, HIS Herold expects that relatively robust crude prices and a continued thawing of the credit markets will positively affect global deal activity in 2010, with more than $20billion of assets on the market and a pool of well-capitalised international buyers seeking to secure supply and grow reserves. Strategically driven Asian NOCs are expected to continue their quest to secure global energy supply through the M&A market, with IOCs and independents battling for the same world-class assets.