Energy

Analysis

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.

This newsletter is a periodic compilation of certain capital markets information. Information contained in this newsletter should not be construed as a recommendation to sell or a recommendation to buy any security. Any reference to or omission of any reference to any company in this newsletter shall not be construed as a recommendation to sell, buy or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. This newsletter is published solely for the general information of clients and friends of Deloitte Corporate Finance LLC. It does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Certain transactions, including those involving early stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known risks, uncertainties and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this newsletter. We and our affiliates and related entities, partners, principals, directors, and employees, including persons involved in the preparation or issuance of this newsletter, may from time to time have “long” and “short” positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein. The companies mentioned in this newsletter may be: (i) investment banking clients of Deloitte Corporate Finance LLC; or (ii) clients of Deloitte Financial Advisory Services LLP and its related entities. The decision to include any company for mention or discussion in this newsletter is wholly unrelated to any audit or other services that Deloitte Corporate Finance LLC may provide or to any audit services or any services that any of its affiliates or related entities may provide to such company. No part of this newsletter may be copied or duplicated in any form by any means, or redistributed without the prior written consent of Deloitte Corporate Finance LLC.

References

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.

Did you find this useful?