For oil and gas M&A, it’s a Buyers’ Market – Oil & Gas Financial Journal

For the majority of global oil & gas companies, 2016 was a tough year. Buffeted by depressed crude oil and natural gas prices, corporate profits were squeezed, sparking widespread restructurings, layoffs and, in certain cases, bankruptcies.In normal circumstances, such conditions would be a boon for merger & acquisition (M&A) activity. However, continued uncertainty over the length and severity of the commodity price downturn has created a value mismatch between buyers and sellers. The result was a moribund M&A market in the oil & gas sector. In fact, according to business advisory firm Deloitte, the first half of 2016 saw the lowest number of deals and deal value in five years.   On reflection, it’s easy to see why deal activity in the oil & gas sector slowed. Firstly, there was a notable lack of terminally distressed sellers; hedging strategies have mostly worked and companies have been able to renegotiate debt and lower operating costs. On top of this, there have been fewer funding options available, in terms of both equity and debt, for buyers of oil & gas assets.For 2017, it is very much a buyers’ market in the oil & gas sector, albeit with some caveats. Purchasers are being asked to come up with more innovative ways of structuring deals and are increasingly required to negotiate with a wider group of stakeholders. Further complicating the M&A picture is the emergence of private equity and other financial buyers who, generally unaccustomed to normal industry practice, bring a vastly different approach to risk and costs.

Source: For oil and gas M&A, it’s a Buyers’ Market – Oil & Gas Financial Journal

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