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Oil and Gas global dealsSix months ended 30 June 2013

www.pwc.co.uk/oilandgas

August 2013

2 | Oil and Gas global deals | PwC

H1 2013 – Oil and Gas deals reportH1 2013 has seen a sharp fall in both deal value and volume when compared with H2 2012, with the first six months of 2013 showing 379 global oil and gas deals at a total deal value of $92.3bn (average deal value of $0.24bn). By comparison, H2 2012 saw 524 deals at a total deal value of $240.3bn (average deal value of $0.46bn). This represents a drop in deal volume of 28%, a fall in deal value of 62% and a 48% decrease in average deal value.

The volume of deals in H1 2013 was down in all sectors. In the upstream sector, deal volume reduced by 25% from 383 deals in H2 2012 to 289 deals in H1 2013. Furthermore, deal value in the upstream sector fell by 72% from $195.8bn in H2 2012 to $55.8bn in H1 2013. Driving this decline was a significant drop in both the volume and average value of top tier deals (those valued at over $1bn). There were 21 such deals in H1 2013, exactly half the number of the previous six months.

Deal value also fell in all regions worldwide, except Africa, where deal value increased by 66% from $6.4bn in H2 2012 to $10.6bn in H1 2013. The increased deal value was driven by two top tier deals which took place in H1 2013, namely – China National Petroleum Corporation’s acquisition of 28.57% in Eni East Africa from Eni S.p.A

for $4.2bn and ONGC Videsh Limited’s acquisition of a 10% participating interest in the Ravuma Area 1 offshore Block in Mozambique from Videocon Industries Limited. Both deals demonstrate the continued interest in East African assets, following last year’s competitive auction for Cove Energy, ultimately won by PTT Exploration and Production for $1.9bn.

In the regions where total deal value decreased, the most significant reductions were felt in North America and the former Soviet Union.

North America’s total deal value dropped by 58% from $105.1bn in H2 2012 (average deal value of $0.34bn) to $44.6bn in H1 2013 (average deal value of $0.20bn). One of the key drivers for the reduction in deal value was a much lower level of top tier transactions compared to H2 2012. This included CNOOC’s purchase of Nexen for £20.7bn and Freeport-McMoRan Copper and Gold Inc’s purchase of Plains Exploration and Production Co for $17.4bn.

Total deal value dropped even more significantly in the former Soviet Union, with a fall of 90% from $71.0bn in H2 2012 (average deal value of $2.96bn) to $6.9bn in H1 2013 (average deal value of $0.40bn) with total deal volumes falling by 28% from H2 2012 (24 deals) to H1

“Whilst we have seen a quiet start to the year in terms of deal activity, we continue to see a healthy appetite for deals from both corporate and financial investors which, together with robust market fundamentals, should mean we see the typical uptick in deal activity in the second half of the year”

Drew StevensonUK Oil & Gas TransactionServices Leader

PwC | Oil and Gas global deals | 3

2013 (17 deals). H2 2012 included Rosneft’s acquisition of 50% of TNK-BP from AAR for $30.7bn and the remaining 50% from BP for $29.3bn, which explains the drop in deal value.

The midstream sector saw total deal values increase by 23% from $18.2bn in H2 2012 to $22.4bn in H1 2013, albeit deal volumes decreased by 20% (35 deals in H2 2012 to 28 deals in H1 2013). In contrast to upstream, the midstream sector included two notable deals in H1 2013: Royal Dutch Shell’s purchase of LNG assets from Repsol SA for $6.7bn to help drive expansion in Latin America and Spain (the largest deal so far in 2013); and Kinder Morgan Energy Partners LP’s acquisition of Copano Energy, a provider of services to natural gas providers, for $4.6bn. We continue to see increasing interest in midstream assets from infrastructure and similar funds.

Deal value in the downstream and oilfield services sectors broadly fell in line with reductions in deal volume over the period. The standout transaction in the downstream sector was Allianz SE and Borealis Infrastructure’s acquisition of Net4Gas from RWE AG for $2.1bn. Net4Gas operates over 3,600km of pipeline for the transmission of Natural Gas in the Czech Republic. The oilfield services sector included just one deal valued at over $1bn – GE Oil and Gas’ $3.1bn acquisition of Lufkin Industries Inc. – a global supplier of oilfield and power transmission products.

The drop in deal volume in the oilfield services sector can in part be attributed

to lower than anticipated drilling activity in North America in late 2012 and for the first part of 2013 – several major oilfield services sector companies issued profit warnings towards the end of 2012 and in early 2013. Furthermore, hesitancy around transactions caused by uncertain pricing and drilling expectations is likely to be responsible for reduced levels of deal activity – with more attention being directed towards development.

Despite the relatively subdued picture seen in the global oil and gas deals market in H1 2013, we remain optimistic about an upturn in deal activity.

Firstly, the fundamentals of the sector remain strong, with oil prices relatively high and stable, averaging $107.5 per bbl, and the Henry Hub Natural Gas price increasing from $18.3 per boe in H2 2012 to $21.9 per boe in H1 2013.

Secondly, financial investors’ appetite for deal activity remains particularly strong in the upstream and oilfield service sectors. Whilst top tier upstream financial investor deals have not been prevalent in the last six months, there have been a number of mid-tier deals demonstrating that interest extends beyond the top funds. Notable deals included Denham Capital’s $300m investment in Bright Horizon Resources and Lime Rock’s $100m investment in Endurance Resources, in addition to acquisitions by Riverstone (Trail Ridge Energy) and Goldman Sachs (Orion Energy). Following a busy 2012, the financial investor spotlight continued to shine on the oilfield services sector, including Investcorp’s acquisition of

Hydrasun.

Thirdly, we typically see a stronger level of activity in the latter half of the year as corporates and financial investors look to close transactions by the year end.

And finally, over the past few years we have seen a significant amount of shale related deals activity in the US. The UK government’s recently announced tax reliefs for shale operations will make the UK among the world’s most competitive shale regions from a fiscal perspective and that, along with what appears to be government support, should lead to renewed interest and an uptick in deal activity.

In summary, it is possible the blip in drilling levels in North America towards the end of 2012 caused investors to pause momentarily (with memories of the 2009-2010 downturn remaining relatively fresh). That being said, it appears to be just that – a blip. The market fundamentals remain positive – strong earnings reports for the later quarters of 2013 from top tier corporates would go some way to rebuilding confidence in the sector which will hopefully mean the last six months of 2013 give us more reason to cheer.


Number of global deals

Period Number Value ($bn) Average value ($bn)

Q1 2009 144 62.3 0.43

Q2 2009 208 55.6 0.27

Q3 2009 244 42.2 0.17

Q4 2009 251 88.4 0.35

Q1 2010 213 88.1 0.41

Q2 2010 228 68.3 0.30

Q3 2010 180 121.2 0.67

Q4 2010 195 106.6 0.55

Q1 2011 161 73.5 0.46

Q2 2011 200 47.3 0.24

Q3 2011 169 74.1 0.44

Q4 2011 213 104.6 0.49

Q1 2012 193 63.7 0.33

Q2 2012 198 48.2 0.24

Q3 2012 241 85.7 0.36

Q4 2012 283 154.6 0.55

Q1 2013 179 46.9 0.26

Q2 2013 200 45.4 0.23

2009 total = 847

2009 total = 248.5

2010 total = 816

2010 total = 384.2

2011 total = 743

2011 total = 299.5

2012 total = 915

H1 2013 = 379

2012 total = 352.2

H1 2013 = 92.3

Last twelve months deal values on a quarterly basis

Dea

l val

ue ($

bn)

No

of d

eals

0

200

400

600

800

1000

1200

0

50

100

150

200

250

300

350

400

450

> $1bn $250 - $1bn < $250m Deal value

Q1’

09

Q2’

09

Q3’

09

Q4’

09

Q1’

10

Q2’

10

Q3’

10

Q4’

10

Q1’

11

Q2’

11

Q3’

11

Q4’

11

Q1’

12

Q2’

12

Q3’

12

Q4’

12

Q1’

13

Q2’

13

Source: John S.Herold, Inc. ‘M&A database’, PwC analysis

Note: deals included as at date of announcement.


H1 2013 – Deal size H1 2013 – Total number of deals

28%

17%

55%

< $250m $250 - $1bn > $1bn

59%

1%

4%

4%5%

5%

8%

6%

8%

North America International Asia-Pacific

Australia

Middle East

South and Central America

Africa

Europe

Former Soviet Union


H1 2013 – Deal value by sector

61%

7%

8%

24%

Upstream

ServicesMidstream

Downstream


Global M&A volume by sector


Global M&A volume


20

40

60

80

100

120

140

-

50

100

150

200

250

300

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012 2013

$ b

oe

Dea

l vo

lum

e

Upstream Midstream Downstream

Services Brent Crude Price Henry Hub Gas Price

Global M&A activity by sectorGlobal M&A activity

- 20.0 40.0 60.0 80.0

100.0 120.0 140.0 160.0

- 20 40 60 80

100 120 140 160 180

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011 2012 2013

$ b

oe

Dea

l val

ue

($b

n)

Upstream Midstream Downstream

Services Henry Hub Gas Price Brent Crude Price


117.9 130.6 156.4 227.8 120.8 178.7 240.3111.9 92.3



Top ten global deals (H1 2013)

Rank Buyer(s) Seller(s) Territory Value $bn

Sector

1 Royal Dutch Shell plc Repsol S.A. Worldwide 6.7 Midstream

2 Kinder Morgan Energy Partners LP

Copano Energy, L.L.C. United States – Diversified 4.6 Midstream

3 Linn Energy, LLC; LinnCo, LLC

Berry Petroleum Company

United States – Diversified 4.5 Upstream

4 China National Petroleum Corporation

Eni S.p.A. Africa – East Africa 4.2 Upstream

5 General Electric Company Lufkin Industries, Inc. Worldwide 3.1 Oilfield Equipment and Services

6 China Petroleum and Chemical Corporation; Sinopec International Petroleum E&P Hongkong Overseas Limited

China Petrochemical Corporation

Globally Diversified 3.0 Upstream

7 ONGC Videsh Ltd.; Oil India Limited

Videocon Industries Ltd. Africa – East Africa 2.5 Upstream

8 Temasek Holdings Pte Ltd. Repsol S.A. Globally Diversified 2.3 Upstream

9 Inergy L.P. Crestwood Holdings, LLC; Crestwood Midstream Partners LP

United States – Diversified 2.2 Midstream

10 Allianz SE; Borealis Infrastructure

RWE AG Europe – Eastern Europe 2.1 Downstream

Contacts

Drew StevensonTel: +44 (0)141 355 4110Email: [email protected]

Alan BarrTel: +44 (0)1224 253 181Email: [email protected]

Neil LeppardTel: +44 (0)20 7804 3168Email: [email protected]

Jon ShelleyTel: +44 (0)1224 253 194Email: [email protected]

Robert AitkenTel: +44 (0)1224 253 129Email: [email protected]

Richard SpilsburyTel: +44 (0)1224 253 214Email: [email protected]

Tony SkrzypeckiTel: +44 (0)20 7804 5500Email: [email protected]

Alan McCraeTel: +44 (0)20 7213 4004Email: [email protected]

Susan Prior Tel: +44 (0)20 7804 9342 Email: [email protected]

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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oil and gas global deals - pwc uk blogs · east african assets, following last year’s ... major...

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