Oil industry gushing as deals soar on rising price of crude
03-02-2011
By Kristy DorseACTIVITY in the global oil and gas sector looks set to continue rising after a surge in the value and volume of deals last year, according to a report published today.
The total value of all transactions recorded by Ernst & Young's annual oil and gas review rose by 35 per cent to $270 billion (£167bn) in 2010, up from $200bn the previous year.
Transaction volumes were 5 per cent higher at 947 deals, nearly three-quarters of which were in the "upstream" fields of exploration, production and services.
The findings will further bolster the mood across the sector, which has been improving as rising oil prices have injected the confidence needed to undertake big deals.
Brent crude - currently trading near a 28-month high of more than $100 on fears over unrest in Egypt - averaged a 2010 price of more than $5 per barrel higher than the $74.58 recorded in 2009.
Concerns remain, including a focus on keeping down costs, the impact of increasing regulation following the Gulf of Mexico disaster and the effect of stuttering economic conditions on global demand.
However, in its separately-published capital confidence barometer, Ernst & Young found that half of all oil and gas firms questioned said they were now prepared to enter the merger and acquisition market - double the number of those holding this view at the end of 2009.
Alec Carstairs, senior partner with Ernst & Young in Aberdeen, said: "It's likely that this increasing optimism will underpin robust transaction activity levels in 2011, with a greater range of acquirers being active.
"Smaller firms that have been nursing their balance sheets through recent years may feel greater confidence to return to acquisition activity, and financial investors are also re-establishing their interest in the sector."
This should inject further buoyancy into Scotland's North Sea oil and gas sector, which has already seen the effects of what most believe will be a continuing drive towards consolidation.
State-owned oil companies around the world have stepped up their efforts to secure new energy resources, a trend that led to last year's $2.9bn purchase of Dana Petroleum by South Korea's KNOC.
The outlook is described as "similarly positive" in the oilfield services sector, which in December witnessed the £600 million acquisition of Aberdeen's PSN by Granite City-rival Wood Group.
By contrast, Carstairs said there were continuing uncertainties in the "downstream" sectors of refining, selling and distribution, which have been plagued by low profit margins and over-capacity.
Such concerns led debt-laden Ineos to strike a $1bn joint venture with Petro-China covering its Scottish refining operations at Grangemouth and similar activities in France.
http://thescotsman.scotsman.com/
Printer Friendly version...
