NEW YORK, Feb. 23, 2009 (GLOBE NEWSWIRE) -- As the financial crisis intensified and economic conditions deteriorated, deal value in the global oil and gas markets experienced progressive reduction throughout 2008 before plunging in the final quarter, according to a report released today by PricewaterhouseCoopers LLP: Oil & Gas Deals: Mergers and acquisitions activity within the global oil and gas market. In the final quarter of 2008, total oil and gas deal value was down 59 percent from 2007, and down 72 percent when compared with the high in the fourth quarter of 2006.
In contrast to the decline in deal value, the number of global oil and gas deals soared to a record 969 in 2008, up 8.5 percent from 2007. The increase in the total number of deals was wholly attributable to upstream activity and smaller deals of $500 million or less, which rose by 15 percent. According to the report, North America and the Russian Federation were the only two territories to experience a decline in the volume of deals.
"Prior to the global economic crisis and significant decreases in oil prices, big deals were already retreating, especially in the oilfield sector," said Rick Roberge, U.S. energy transaction services partner at PricewaterhouseCoopers. "Total North American deal value fell 43 percent from $129.7 billion in 2007 to $73.6 billion in 2008. There were only 15 deals in 2008 worth $1 billion or more, compared to 31 in 2007."
Oil & Gas Deals found the credit crunch, wider economic downturn, and a plummeting oil price significantly impacted deal values. Total global deal value in 2008 fell 38 percent to $180.4 billion, down from the 2007 high of $292.2 billion. There were only two deals that topped the $5 billion mark in 2008, compared with ten such deals in 2007.
Natural Gas claimed the top spot, as six of the top ten 2008 oil and gas deals were purchases of natural gas assets, and five of the six were 'unconventional' resources that require considerable technological investment. All of the Natural Gas deals were in Australia and North America, reflecting the attraction of targets in stable locations close to end markets, as companies responded to security of supply constraints.
"The rush to develop Australian coal bed methane gas assets for liquefied natural gas export helped catapult Australia's share of worldwide oil and gas deal value up tenfold," said Roberge. "Upstream deal value in Australia multiplied from $1.7 billion in 2007 to $16.6 billion in 2008."
PricewaterhouseCoopers expects constrained debt markets, depressed equity prices and commodity prices to stall significant deal-making in the early part of 2009; however, it is difficult to see stronger players remaining on the sidelines for the whole of 2009 given the opportunities for acquisitions at low valuations. An opening of the equity markets will be followed by the debt markets which will allow financing to become available.
"While we believe the first half of 2009 will be subdued, any easing of the debt and equity markets combined with some positive movement in the price of oil is likely to herald a reawakening of deal activity in 2009. When the market returns, and the financial crisis has passed, the potential for a fast revival in commodity prices and deal-making is there," added Roberge.
For more information on Oil & Gas Deals and to access the full report, visit: www.pwc.com/ogdeals.
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