Brisbane Times -...

Brisbane Times -

https://www.brisbanetimes.com.au/bu...s-m-and-a-on-the-horizon-20180601-p4ziy5.html

More oil and gas M&A on the horizon
By Cole Latimer
2 June 2018 — 12:00am

Talking points

• Nearly $20 billion in M&A activity has been carried over the last nine months.
• Private equity are likely to be the big buyers.
• A rising oil price has been a major driver for this increased optimism.

A new report has indicated three out of five oil and gas companies want to carry out an acquisition in the next 12 months. EY’s 2018 global mergers and acquisition survey found more than 60 per cent of oil and gas executives surveyed intended to pursue acquisitions, predominately in the US, Brazil and Canada.

“The latest EY report found that 73 per cent of oil and gas executives expect to complete more deals in the next 12 months compared with 37 per cent just six months ago. It isn’t surprising, therefore, that 74 per cent expect their M&A pipeline to increase in the next year,” EY global oil and gas transaction leader Andy Brogan said. These executives see the lack of high-quality targets, rather than cost, to be the main risk to deals over the next 12 months. They will target the pre-development upstream assets – such as attractive gas fields – and later life mature assets, such as operating gas wells or projects.

Oil and gas companies expect their main competition for takeovers to come from the private equity space.

Who are the next oil and gas M&A targets?
This increased optimism has been driven by a stronger oil price, which has been built off oil cartel OPEC and Russia’s decision late last year to cut global oil production levels. This had pushed the value of many oil and gas companies north, however, after Saudi Arabia and Russia last month said they may lift the oil curb the price fell rapidly, wiping billions off energy companies’ values. Australia has seen a flurry of large M&A activity over the last six months, with billions of dollars trading hands. US private equity firm Harbour Energy’s $14.5 billion bid for Australian oil and gas play Santos was the largest in Australian history, however, Santos knocked back the offer at the time stating that it undervalued the company.
Another US private equity firm, Lone Star Funds, made a $530 million takeover offer for Australian-listed, China gas play Sino Gas and Energy on Thursday.

Earlier in the year, AWE was acquired by Japanese firm Mitsui for $602 million following a tense bidding war with two other resources companies, while Woodside paid $US744 million ($985 million) to ExxonMobil to gain control of the majority of their joint venture Scarborough offshore gas project, off of Western Australia. Late last year, Beach Energy bought Lattice Energy for $1.6 billion.

Wood Mackenzie’s oil and gas lead Saul Kavonic said, “the appetite to invest is back, and organic and M&A opportunities are back on the radar.”
Mr Kavonic forecast more consolidation of Australia’s domestic gas producers, with both energy companies and private equity as buyers.

“Beach, Senex, Cooper, Central and Strike could all pose as candidates for acquisition,” he said.