The value of mergers and acquisitions (M&A) by Middle East oil and gas firms plunged by over a third to $3.7bn in 2008, it was revealed on Monday.
The fall, from a record high of $13bn a year earlier, came on the back of increasingly expensive corporate and asset transactions, according to the 2009 Global Upstream M&A Review.
However, takeover activity should increase through 2009 and into 2010 as the region’s national oil companies and sovereign wealth funds aggressively seek quality companies and assets, said Chris Sheehan, director of M&A research for research and consulting firm IHS Herold, which was involved in the drawing up the report.
Globally, M&A upstream transaction values slumped to $104bn in 2008 from an annual average of nearly $160bn in 2005-2007.
Plunging commodity prices and the extreme weakness in equity and credit markets dragged the number of deal activities in the final five months of 2008 down to 79, against 203 transactions announced by July 31, the report revealed.
“High stock prices, driven by soaring commodity prices in the first half of the year, made corporate takeovers very expensive,” Sheehan said.
The report also showed that national oil companies and sovereign wealth funds, including those based in the Middle East, accounted for a record high of 15 percent of global market transactions during the year, including six of the 10 largest asset deals.
Although transactions by Middle East firms fell, Asian national oil companies continued to be active buyers in the region, and internationally, as spending increased to $13.1bn from $11.8bn in 2007.
The largest 2008 international purchases by Middle East companies was Abu Dhabi based Mubadala Development acquiring Southeast Asia-focused Pearl Energy from Aabar Petroleum for $833m, the report added.
The Abu Dhabi National Energy Company (TAQA) bought interests in fields in the UK North Sea from ExxonMobil and Royal Dutch Shell for $631m.
Steep decline in commodity prices and the equity markets should lead to increased M&A activity, the report concluded.
“Corporate takeover activity should increase through 2009 and into 2010,” Sheehan said.
“Looking to 2009 and beyond, the number of assets coming to the market will increase.”
The average price paid for a barrel of oil equivalent (boe) of proved reserves purchased in 2008 increased to $11.51 from $10.01 per boe in 2007
Harrison Lovegrove & Company, a Standard Chartered group company, was also invovled in drawing up the 2009 Global Upstream M&A Review.
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