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Analysis

Oil & Gas Mergers and Acquisitions Report – Year-end 2016

Out of the starting blocks

Take a deeper look into how an improved price, business, and credit environment will impact mergers and acquisitions (M&A) in oil and gas (O&G)—and your business—in 2017. Read Deloitte’s Oil & Gas Mergers and Acquisitions 2016 year-end report to get a head start in factoring these trends into your plans.

What’s ahead for M&A in oil and gas?

If oil price is one big driver of M&A in oil and gas, we’ve seen that credit availability is likely another. Several factors point to an improved credit environment in 2017, especially for O&G companies that are investment grade and have unused credit lines and debt maturities after 2020.

Factors such as:
  • Upward revisions of the value of oil and gas reserves due to higher price decks
  • Greater conversion of uncompleted US wells into production
  • Increased hedging positions of companies are increasingly comforting lenders

An environment of oil price stability and measured recovery is likely to revive O&G M&A activity in 2017. To assess what lies ahead in 2017, it is important to gain a deeper understanding of the events of 2016. Download the report to take a deeper look.

Looking back at 2016: M&A in oil and gas

2016 was a roller coaster year in the oil and gas industry. Oil prices dropped to a 13-year low of $26 per barrel, upstream capital expenditure (CAPEX) fell for the second consecutive year, O&G bankruptcies exceeded 2008-2009 Great Recession levels, and, most recently, OPEC finally agreed to reduce its 2017 production by about 1.2 million barrels per day. However, weak fundamentals failed to dampen O&G M&A in 2016—both deal count and deal value were higher than 2015 levels and the industry witnessed significant mega-deals and sectoral swings:

  • The industry saw seven deals more than $10 billion in size, the highest ever
  • Midstream overtook the upstream  segment for the first time in terms of deal value
  • The 2016 deal value in oilfield services (OFS) and downstream was at record high levels 

Opportunities backed by a measured return to cautious optimism seem to have provided the thrust to M&A in oil and gas, especially in the second half of 2016.

Although upstream transactions did not include any major mega-deals, the overall number of upstream transactions increased in the second half of 2016, as oil and natural gas prices edged up, inducing buyers to show a stronger appetite for riskier underdeveloped or non-producing assets. 

2016 turned out to be far better than many expected. It seems that M&A in oil and gas has passed its low point of 2015. With oil prices stabilizing above $50 per barrel, improving credit availability and demand prospects, and expectations of markets balancing earlier than expected due to OPEC/non-OPEC cuts, a continued recovery in M&A activity is expected as the coming year progresses. That said, 2017 M&A trends are likely to differ by sector and geographic locations. Where upstream takes a lead, OFS responds with a lag, US midstream remains steady with more mid-sized deals, and downstream sees moderate activity led by cross-country deals.

Oil and Gas Pipeline

​Our oil and gas transaction data is much more than facts figures—it has a story to tell. Read our full report for an illustrative summary of 2016 deal activity for the first half of the year and insights for the upcoming months.  

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