Oil & Gas Mergers & Acquisitions Slashed in 2013

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The dollar value of global merger & acquisition (M&A) transactions in the oil & gas industry plunged by nearly 50% in 2013 from a record high level in 2012. The transaction count fell by 20% led by a very sluggish first half of the year. The data was reported last Thursday by research firm IHS Inc. (NYSE: IHS).

The value of M&A deals in 2012 totaled nearly $250 billion compared with a total of around $136 billion in 2013. In the three years from 2010 through 2012 more than $600 billion in M&A deals were completed.

No corporate merger valued at more than $5 billion occurred in 2013, while there were several deals valued at more than $10 billion in 2012. Two of 2012’s biggest deals were Freeport-McMoRan Copper and Gold Inc.’s (NYSE: FCX) acquisition of McMoRan Exploration and Plains Exploration & Production for a total of about $20 billion. Another big acquisition in 2012 was Cnooc Ltd.’s (NYSE: CEO) $15 billion deal for Nexen Energy.

2012’s biggest deal, of course, was Rosneft’s $60 billion buyout of TNK-BP, and there was no deal anywhere near that size in 2013.

Last year’s largest deal was the $6 billion acquisition of Eagle Ford assets from privately held GeoSouthern Energy by Devon Energy Corp. (NYSE: DVN). Only 3 of the 20 largest global deals involved North American acquisitions and North American deals totaled less than 45% of global deals, down from around 50% in 2012.

According to IHS, half of 2013’s 10 biggest deals were completed by national oil companies from China and the Caspian region. Other areas where M&A activity grew were West and East Africa and Latin America.

While M&A activity may have slowed, capital spending did not. IHS notes, “[T]he total global upstream capital investment increased by approximately 10 percent in 2013 due to the significant growth in exploration and development spending.” Considering that the three-year spending total on M&A was $600 billion, it makes sense that companies would slow down their buying and spend some time developing their new assets — or in the case of sellers, spending their new money.