Euro crunch to drive M&A

SMALL fish beware: the big boys are coming for you.
Euro crunch to drive M&A Euro crunch to drive M&A Euro crunch to drive M&A Euro crunch to drive M&A Euro crunch to drive M&A


James McGrath

That was the word from IHS Herold after releasing its 2012 global upstream mergers and acquisitions review, which found small-cap international exploration and production companies could expect a tap on the shoulder from the big boys as the smaller players found debt harder to come by.

IHS energy M&A research director Christopher Sheehan said he expected a rise in predatory behaviour, especially in Asia-linked markets such as Australia.

“We believe that, in the present volatile environment, global upstream M&A consolidation will accelerate in 2012 and beyond as the well-financed ‘haves’ prey on the capital constrained ‘have-nots’,“ he said.

“Many of the latter are key holders of massive undeveloped gas and liquids resources that can provide material growth opportunities or establish a strategic foothold in emerging basins.

“Consolidation, including a rise in corporate takeovers, will be led by national oil companies and sovereign wealth funds, major integrated companies, global industrial conglomerates and private equity investors, who all seek opportunistic purchases of capital-intensive oil and gas assets and financially strained companies that own prolific resource potential.”

Reviewing last year’s M&A action, IHS said most of the activity was driven by the so-called “shale-gale” in the US, with cross-border companies bullish on the prospect of LNG exports.

Fuelled by national oil companies and international buyers making acquisitions in North American shale gas, shale oil and tight oil basins, global transactions involving unconventional oil and gas resources reached a record high $US75 billion ($A71.9 billion) in 2011.

“Established shale gas and emerging shale oil and tight oil plays in the US are attractive to foreign buyers since these plays offer massive discovered resources with low exploration risk in a country with relatively high political and fiscal stability, versus other global regions such as the Middle East, Africa and Latin America,” Sheehan said.

“The longer-term potential of LNG exports to the Asia Pacific from Canada and the US is a strategic driver of many of the cross-border shale gas acquisitions in North America.”