Looking forward, looking back: A Deloitte report from last week finds mergers and acquisitions in the oil-and-gas industry were down last year, likely reflecting the industry's "caution" as it emerged from a downturn. But, the report also predicts that M&A action is poised for a 2018 rebound.
Bottom line: Global deal value fell from $365 billion in 2016 to $287 billion last year, while deal volume went from 533 total number of deals in 2016 to 502 in 2017 as action slowed in the second half of the year.
State of the Permian: One interesting U.S. upstream note — the second half of 2017 saw a big decline in deals in the surging Permian Basin of Texas and New Mexico. The report says this reflects high costs (in the $60,000-per-acre range) and companies' interest in drilling their existing holdings, the report states.
Big picture: One global trend last year was some companies divesting major holdings to cut debt or focus on core areas — the report cites Hess selling its North Sea and West African assets, and Shell largely abandoning the Canadian oil sands.
What's next: The report says that rising industry investment, higher prices, the decline in global oil stockpiles and other factors could drive an uptick in activity.
- "Certainly higher, more stable oil and prices could generate interest from more cautious players, improve access to financing, and narrow the buyer-seller valuation gap. Moreover, the majors as well as the larger independent and integrated oil companies continue to execute their divestment plans, providing opportunities for smaller and more regionally focused companies," it states.