Merger and acquisition activity has grown in the Middle East/North Africa region despite a modest value in both deal counts and total values for global oil and gas transactions in the first half of 2012 according to a whitepaper from Deloitte & Touche.
According to the whitepaper, the MENA has seen some significant developments and opportunities for upstream M&A in recent months. With the expectations for Libya, now poised to return to ful-scale iol production in the near future and Iraqi oil production having passed 3 million bpd, foreign investors are looking at new opportunities in the region.
“When we assess the current state of the oil and gas sector in the MENA region, the question remains as to whether these nations will achieve optimum production levels or whether they will continue to face constraints due to outdated infrastructure, political challenges, policy uncertainty and continued security threats,” said Kenneth McKellar, energy and resources leader, Deloitte Middle East. “These are some of the issues that interested E&P companies are being faced with,” he added.
North African countries are also considered to be returning to ‘Business as usual’ mode, with an increase in foreign investments. But legacy risks remain, according to the whitepaper, as off-take contracts with national oil companies continue to experience disruption during the transition period of governments with E&P companies in the region facing significant challenges to working capital management.
“Whilst the uncertainty caused by the Arab Spring might be keeping certain investors out of these markets, there are other investors who are taking a longer term view on opportunities in MENA, particularly strategic investors who have the financial and operational resources, to acquire these assets at low prices,” said Adnan Fazli, oil and gas financial advisory leader, Deloitte Middle East.
The Deloitte whitepaper also takes a closer look at the M&A issues that face investors looking to transact in the region, and how these are being managed through the screening, diligence and valuation phases of the transaction. Here are some of the issues as the Deloitte whitepaper outlines:
The Deloitte whitepaper also looks at the M&A issues which investors face in the region such as fiscal regime and pricing uncertainty, operational challenges and valuing risk, capital and carry commitments and decommissioning liabilities, unconventional assets and tax considerations.
