PwC Russia ‘Mega deals’ continue to blaze a trail in Oil and Gas sector
While the first quarter of 2011 witnessed the lowest level of deal activity in the oil and gas sector since early 2009, it is clear that ‘mega deals’ are still very much on the agenda according to PwC’s latest Oil and Gas Global Deal trends report.
The report reveals that there were 163 deals globally in the first quarter of 2011, which is down 20% on levels seen in 2010. However, in value terms, $94bn of transactions were also completed within the same deal space, in line with 201o average levels.
Upstream deals continue to account for the majority of all oil and gas transactions securing 67% of all deals so far this year, worth $63bn. Of these, the larger upstream contracts focussed on long term goals in strategic regions and included major gas asset deals such as BP’s deal with Reliance in India and PetroChina’s joint venture with Encana in Canada.
According to the report, the oilfield services sector also saw a continuation of the big ticket deals, characteristic of the M&A market in recent years. And valuation levels are also increasing in the service sectors with multiples returning to pre-recession levels.
Igor Lotakov, partner, Oil and Gas sub-sector leader, PwC in Russia, commented:
“Deal activity in the first quarter of 2011 has dropped off slightly from the levels recorded in 2010, but the outlook is encouraging because continuing improved sentiment within the sector has still driven strong deal activity.
“As expected, below the top tier deals, the mid market remains sluggish largely down to the fact that private equity hasn’t made any meaningful return to the sector with most of the recent deals down to corporates with healthy balance sheets.
“Overall, frontier development, particularly for gas assets, and scale in the service sector have been the main themes to date for the first quarter.
Igor Lotakov concluded:
“In the short term, upstream will focus on frontier regions and the rationalisation of portfolios in more mature territories will also be on the cards. Wealthy corporates will be the short term drivers of M&A.”