Energy M&A update: Q3 2017

As demand for oil and liquefied natural gas (LNG) grows, producers are hopeful that prices will rebound and stabilize. On the supply side, US shale signals a slowdown and China drives global growth in solar energy. This 'Energy M&A update: Q3 2017' provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the energy industry.

Energy trends

  • Global gas producers seek to boost demand for liquefied natural gas (LNG)1: LNG supply from key producers such as the United States, Russia, Australia, and Qatar continue to flood the market, driving LNG prices to nearly half of their 2014 peak at $8.70 per million British thermal units (BTUs). LNG companies seek to stabilize prices by investing in natural gas infrastructure that can support this new supply in emerging markets such as Myanmar, Vietnam, and South Africa.
  • China drives global growth in solar2: The International Energy Agency (IEA) released a report this quarter suggesting that solar power grew faster than any other source of fuel for the first time in history in 2016. The agency reported that 165 gigawatts of renewables were completed last year. Solar powered by photovoltaics grew by 50 percent with almost half of new plants built in China.
  • US shale signals slowdown3: The number of rigs currently drilling for oil in the US, typically viewed as a proxy for activity in the sector, grew six percent in the third quarter—a notable deceleration from the previous four quarters, during which it rose more than 20 percent on average. Last month, the US Energy Information Administration cut its forecast for US oil production, saying it now expects the industry to end the year at 9.7 million barrels a day, down from 9.8 million.
  • Oil prices rebound in Q34: The IEA raised its forecast for oil demand growth for the next year. By the end of July, demand grew 3.2 percent from the previous year—the largest year-over-year increase since 2010. On the supply side, the number of rigs drilling oil wells in the US fell by six during the quarter. Projections for next year’s production have moderated to 9.8 million barrels a day, down from the previous 10 million.

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1 “Global gas producers turn to next challenge: Finding buyers”, Wall Street Journal. October 15, 2017.
2 “Solar grew faster than all other forms of power for the first time,” Bloomberg Markets. October 4, 2017.
3 “US Shale Juggernaut shows signs of fatigue,” Wall Street Journal. October 6, 2017.
4 “Oil prices bounce back in third quarter,” Wall Street Journal. October 1, 2017.

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