The oil and gas industry increased its mergers and acquisitions deals in 2012 by 38% over 2011, according to Dealogic. M&A activity totaled $348 billion in 2012, the industry’s highest total since at least 2000.

The largest deal in the United States was the ConocoPhillips (NYSE: COP) spin-off of its refining and marketing business to Phillips 66 (NYSE: PSX) in a deal worth about $21 billion. The biggest deal of all involved Russia’s OAO Rosneft, which paid a total of $54.4 billion for TNK-BP, a troubled joint venture between Russian oligarchs and BP PLC (NYSE: BP).

Investment bankers prospered as well. The Wall Street Journal reports that Barclays PLC (NYSE: BCS) worked on more than 30% of the oil and gas industry deals. Citigroup Inc. (NYSE: C) and Credit Suisse AG (NYSE: CS) filled out the top three.

In addition to M&A, debt issues were robust in 2012. Dealogic reports that debt issuance rose 62% year-over-year in 2012 to a total of $251 billion. The biggest deal of the year — $7 billion — was scored by Brazil’s Petroleo Brasileiro S.A. (Petrobras) (NYSE: PBR). Phillips 66 raised $5.8 billion and Chevron Corp. (NYSE: CVX) raised $4 billion in other big deals. Citigroup and J.P. Morgan Chase & Co. (NYSE: JPM) led the banks involved in debt sales.

With interest rates at rock-bottom, it is no big surprise that oil and gas companies either refinanced old debt or sought new debt. That is only smart.

The M&A activity jumped because industry players are seeking to align themselves for the coming North American shale oil and gas boom. Some companies, like BP and Chesapeake Energy Corp. (NYSE: CHK), are selling off assets to address specific issues unique to each. But most are jockeying for liquids-rich leases in the major U.S. shale plays.

That jockeying should continue into next year, led by Cnooc Ltd.’s (NYSE: CEO) takeover of Canada’s Nexen Inc. (NYSE: NXY) for $15.1 billion. This one deal could start a new round of Chinese investment and buyouts in North America, particularly in the United States. Things are just starting to get interesting.

Paul Ausick

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