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Analysis

Energy M&A update: Q4 2017

As oil prices reached a 2017 year end high, the Energy, Mining & Utilities became the top valued sector in the US, with Utilities projected to increase value in 2018. On the other hand, alternative energy could be at risk due to foreign solar panel trade barriers. This 'Energy M&A update: Q4 2017' provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the energy industry.

Energy trends

  • Energy, Utilities M&A tops 2017 US deal activity1: By value, Energy, Mining & Utilities was the US’s top sector in 2017 with $260 B changing hands across 436 transactions. Out of this total volume, there has been growing investment in in the Utilities space (the sub-sector reached a record $43.7 B in value), with more activity poised for 2018 given recent shifts by major oil companies toward electricity.
  • US trade policy drives solar panel imports2: Foreign solar panel manufacturers ramped up shipments to the US ahead of government decisions on whether to erect new trade barriers. Trade data shows US import volumes for solar panels and related products more than doubled compared with the previous year. The Solar Energy Industries Association argues that the U.S. energy industry could suffer if tariffs push up prices on solar panels.
  • US refiners hold off on capital investment3: US fuel refiners are expected to reap billions in tax savings under the new Republican tax bill. Despite this fact, major refiners such as Andeavor may use this cash inflow to increase dividends and share buybacks with only a portion of the inflow earmarked for further capital expenditures given the industry’s overcapacity and the potential for continued volatility in commodity prices.
  • Oil prices end Q4 near two-year high4: Oil prices ended 2017 just off their highest levels of the year, but remain near the highest levels seen in 26 months. Prices continue to exhibit increasing sensitivity to supply disruptions as longstanding inventory stockpiles have steadily been worked down in recent months. A December pipeline burst in Libya, which is expected to reduce production by 100,000 barrels per day, drove the industry's most recent price movements.

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References

1 “Global and regional M&A report Q4 2017 (Proprietary),” MergerMarket. January 3, 2018.
2 “Foreign firms rush washers, solar panels into US amid trade fears,” Wall Street Journal. January 3, 2018.
3 “Why refiners are expected to give their tax savings right back to shareholders,” Wall Street Journal. December 17, 2017.
4 “Oil ease off more than two-year high,” Wall Street Journal. December 27, 2017.

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