A significant increase in mergers and acquisitions in the oil and gas sector is likely to take place in 2015, as a result of oil prices falling below $50 from Brent’s $115 high late June, a new study predicts.
A.T. Kearney said that mergers and acquisitions (M&A) in oil and gas showed a strong recovery in 2014 after a slow 2013.
And with recent oil price decreases and OPEC’s decision not to cut output, 2015 is set to see even further M&A activity.
“These strategic deals will be key to growing value and aiding companies to navigate market turbulence,” said A.T. Kearney
Richard Forrest, global lead partner for the energy practice and co-author of the Oil & Gas M&A study, A.T. Kearney, said: “Strategic approaches to M&A are critical to address the intense cost and cash-flow pressures experienced by oil and gas players.
“Our analysis and discussions with industry executives revealed the likely onset of a new wave of mergers and acquisitions across the value chain in the next 6 to 12 months,” said
He added: “The window of opportunity may be shorter than expected and will be driven by oil price expectations. Those companies with strong cash flow and healthy balance sheets will be able to leverage opportunities, while others will need to define strategies just to survive.”
The consulting firm said all players in the industry can benefit from a strategic approach to mergers and acquisitions, including International Oil Companies (IOCs), National Oil Companies (NOCs), independent oil companies, service sector businesses and financial investors.
Jose Alberich, partner, A.T. Kearney Middle East, commented: “For Middle East players, in particular NOCs but also IOCs and oil majors, there may be opportunities to strengthen their positions with strategic M&A deals.
“Attractive assets might struggle with the lower oil prices, and as they become distressed may turn into viable targets for larger players.
“However, lower oil prices may well mean less cash available to potential buyers, so any moves made will be very selective. All activity will be carefully considered, with NOCs reassessing strategies to ensure proactive moves fit their mandate and government objectives,” he added.
