As the global upstream merger and acquisition (M&A) deals rebounded to pre-Covid-19 levels in 2021 to hit a three-year high, it is expected to stay active for the foreseeable future, amid the move for lower carbon emission by countries of the world including Nigeria and the move to deliver profitable oil and gas production, Rystad energy has revealed.
According to Ilka Haarmann, senior analyst at Rystad Energy, “With a strong potential deal pipeline, continuous pressure on companies to transform amid a global push to lower carbon emissions while simultaneously delivering profitable oil and gas production, and an average oil price of above $60 per barrel expected for 2022, the upstream M&A market is likely to stay active for the foreseeable future,”
Rystad Energy research shows that global upstream M&A deals recovered to pre-Covid-19 levels in 2021, reaching a total of $181 billion, a 70 per cent increase over 2020 while noting that the total deal value for the previous was the highest in three years and almost reached the highs seen in 2017 and 2018 of $205 billion and $199 billion, respectively.
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This was due to sellers having difficulty finding buyers during the downturn in 2020, but this ended last year as big deals made a comeback due to high commodity prices and a strengthening market, according to the report.
“Deals worth more than $1 billion accounted for $126 billion, or 70 per cent of the total. The number of $1 billion-plus deals announced nearly tripled, with 35 announced in 2021 compared to just 13 in 2020,” it added.
Data from the report also revealed that the share of resources sold in transactions shifted in 2021, with gas accounting for 56 per cent of all traded resources, up from 43 per cent in 2020.
Furthermore, oil accounted for 31 per cent, while natural gas liquids accounted for 9 per cent. This shift was primarily driven by acquisitions in North America in 2021, but it was also aided by deal activity in other regions.
The largest field acquisitions, according to the report, were Aker BP’s announcement to acquire Lundin Energy’s oil and gas portfolio, valued at approximately $14 billion, and ConocoPhillips’ acquisition of Shell’s Permian Basin position for $9.5 billion.
In addition, Permian field acquisitions totalled $19 billion in 2021, accounting for more than half of North American field and license acquisitions totalling $35 billion. Russian acquisitions totalled $12 billion, while European acquisitions totalled around $24 billion.
While providing a potential outlook for global upstream M&A, Rystad stated that the deal pipeline is robust, and the upstream M&A market looks set to strengthen further, with deals in the US likely to remain a key driver of global deal value. Large sales in other regions could also occur in 2022, especially if majors continue to streamline their portfolios.
