Global oil and gas transactions review 2012

Transcription

1 Global oil and gas transactions review Europe, Middle East, India and Africa tax policy outlook i

2 Introduction Welcome to Ernst & Young s annual review of global oil and gas transaction activity. In this report, we look back at some of the main trends in oil and gas deal activity over 2012 and explore the outlook for transactions in the sector in We analyze the diverse dynamics in the upstream, midstream, segments, as well as the regional trends that underlie the macro environment. With an average of more than four transactions every day, oil and gas has remained one of the most active and resilient global sectors for M&A. The continuing turbulence in many parts of the global economy and its capital markets that characterized 2012 created both opportunities and challenges for a sector that is all about invest it or preserve it. pushed buyers in this direction. continued to be the dominant region for activity, covering themes underpinning upstream activity International Oil mid-cap space look set to continue to drive activity levels through continued, stemming from ongoing portfolio rebalance and capital Asian markets, supported a brighter picture for other markets, deliver global connectivity and trading potential remain attractive to considered. Without a repeat of a corporate deal of the scale of Kinder Morgan's levels to continue to increase outside of North America as assets, driven by capital allocation and regulatory factors. transactions in the oil and gas sector. The dynamics of an energy- year of activity for transactions across every segment of the oil and gas value chain. 2 Global oil and gas transactions review 2012

3 1. Upstream 2. Downstream 4. Regional roundup Africa Australia India

4 Announced value (US$b)» continued to grab headlines, emerging political unrest continues to impact a number of regions. Against this uncertain economic outlook M&A markets have activity, further compounded by tight credit from the prior year, M&A spend is up and the sector has outperformed relative to the Three key themes underpinned deal activity focused on optimizing their asset portfolios, commitments have had to entertain varied strategic options as conventional debt and equity investment remains challenging. number of large discoveries have also championed activity in the sector. Activity levels declined slightly, but M&A spend rose Upstream deal values and volumes Transaction volume Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q Transaction numbers Transaction value (US$b) Top 10 deals by value Deal value (US$b)

5 from 2011, but total announced transaction second half of 2012 account for much of this increased value, but the rise in M&A the value of the top 10 largest upstream transactions in each of the last three years. largest announced deal in the sector and deal ever. The transaction, undertaken as Asset-led transactions continue to dominate over corporate transactions, accounting for decline from Asset deals, either full accessible means of raising capital for most corporate deals occurred during the year, reduced pricing, it is often easier to reach agreement on underlying asset value than corporate valuations. On a regional basis, North America number of announced transactions in the TNK-BP transactions. Deal volume asset vs. corporate transactions 1,400 Deal value asset vs. corporate transactions 300 1, Number of transactions 1, Announced value (US$b) Asset Corporate Asset Corporate 5

6 Deal value by region Deal value (US$b) Africa Asia Australia Canada Europe CIS US South America Value of transactions in 2011 Value of transactions in 2012 Number of deals by region Deal volume Africa Asia Australia Canada Europe CIS US South America Number of transactions in 2011 Number of transactions in 2012 driver, featuring in a quarter of all transactions announced in the year. Not surprisingly, North America continues to account for the impact of the shale gas boom, much of the focus for the year has been on the fast-emerging shale oil plays, and acreage on the North American unconventional assets continue to attract 6 Global oil and gas transactions review 2012

7 holder in Poland. interest uptick in activity is very positive for those dependent on the North obstacle to this transition. The uncertainty around taking on only access to required resources but also skilled personnel and Private equity has played an important role in the sector since the mid-cap community. The sector has seen increased private equity 2011 levels. Investment in unconventional opportunities has generated build on sizable gains made in 2010 and 2011 through combined This year faces many of the same challenges as the start of The uncertain economic outlook is unlikely to be resolved in the resilience in M&A terms as the key drivers remain the same. cost escalation to be a driver for both asset and corporate developments have fundamentally changed the global demand navigate the uncertainty. Global oil and gas transactions review

8 » in those mature markets due to the demand, driven by uncertain economic outlook and austerity measures. In contrast, transaction volumes in Asia have increased to the prior year. Based on disclosed values, the top 10 deals in the sector during 2012 value of all transactions in the sector globally. during the year involved Macquarie of a 12,000-km gas transmission system in refineries and 10 terminals in Japan for Top 10 transactions in 2012 based on disclosed value Announced date Buyers Sellers Nature of asset Value US$m Inc. Japan 1 Nov 12 Williams Partners LP Williams Inc. Partners LP Inergy LP company in Brazil production facility, propylene splitter chemicals business and then merged the merged company Promigas, a natural gas transmission and distribution company Louisiana BP plc 8

9 volume. Deal volume asset vs. corporate transactions Deal volume Asset Corporate Deal value asset vs. corporate transactions Deal volume (US$b) Asset Corporate 9

10 transactions announced during the year strategic divestments, due to complete American fuels investments on its three advantaged, and its associated marketing businesses. Northeast, including its hubs at the 2012 and to recover its investment in the appointed, and the various Petroplus marketing and logistics assets. marketing activities. converted to a storage terminal and develop and invest in an import and distribution terminal to be managed by 1m cubic meters. to be sold. 10 Global oil and gas transactions review 2012

11 stoppages across the Atlantic and limited utilization because oil product demand has seen limited improvement and crude prices converting to storage terminals to defer traders, are likely to be interested in the other hand, interest for relatively simple could be converted into storage facilities. negotiation strength and suppressed valuations. Global oil and gas transactions review

12 these transactions. brands in Japan. The other key transaction in the retail marketing space is the last trading day before the deal announcement. Alimentation the necessary economies of scale to generate the required return local oil companies. companies have the necessary economies of scale, they have throughputs, strategically located sites and strong non-fuel their supply envelope Independent retailers looking to improve their market share and economies of scale specialization as opposed to control over the full supply chain these transactions. The largest storage transaction in terms of trading industry. In recent years, demand for capacity has climbed, and consumption regulations, leading to a greater need of segregated storage and blending capabilities hypermarkets compulsory stock obligations 12 Global oil and gas transactions review 2012

13 In Asia, storage terminal transactions have been minimal during invest in an import and distribution terminal to be managed may reduce the pressure for storage assets in the medium term in region, primarily involving assets related to gas gathering and globally. The number of transactions in the midstream segment in 2012 gas liquids infrastructure and logistics business. Global oil and gas transactions review

14 » Oilfield services Transaction levels stayed resilient in the overseas that give buyers rapid entries to hard-to- Overall, transaction levels remained average disclosed deal value fell from due to some very large deals in 2011, such market participants reported an uptick in deal activity and valuation trends by the end of stable oil price, strong current trading and multiples achieved for deals is not back at continued possibilities for strong pricing in biggest deals involved private equity buyers an investor category notable by its 14

15 Top 10 transactions in 2012 based on disclosed value Announced Date Buyers Target Sellers Nature of Asset US$MM 5 Nov 12 Petroleum Berhad Inc. International Holdings Ltd. Tender rig businesses of both companies Listed business businesses and systems Listed business Marine services provider of logistics management of multi-client library and nodes businesses rigs solutions company Transocean Ltd. 1,050 Listed business the oil, oil sands and gas producing regions of 11 Jun Apr 12 Paradigm Ltd. seismic processing and imaging, interpretation, planning and drilling Wilson International Inc. 1,005 1,000 and systems for offshore applications Global oil and gas transactions review

16 the acquirer. over medium- and long-term fundamentals in the sector. thresholds for minimum deal sizes, looking to acquire a platform available asset pool for private equity buyers across all sections of the market. looking to participate in transactions and increasing leverage in banks might be required, each offering smaller debt tranches. Larger deals often involved a long tail of more than 10 banks, increasing transaction risk. Buyers continued to invest to increase their international presence. 16 Global oil and gas transactions review 2012

17 As might have been predicted, the biggest transaction of the to combine their tender rig businesses. This is to be achieved by a combination of equity and debt and deliver local content requirements. volumes and values during Increasingly, buyers are searching services. Technology transactions took place at every point in the gas transactions. the biggest deals of the year, and a sign of resurgent private equity. innovation, market-leading intellectual property and leading services sector. A relatively stable oil price, a recovering banking burgeoning unconventional production, mean that ambitious business combinations high on their agenda for some time to come. Global oil and gas transactions review

18 » 18 Global oil and gas transactions review 2012

19 Africa 20 Australia 21 Canada 22 CIS 24 Europe 25 Far East 26 India 28 Middle East 29 United States 30 Global oil and gas transactions review

20 » Africa see a rebound from this and that the recent trend of a strong interest in acreage in Africa has continued, ongoing tensions and political instability may have impacted transaction activity in Although there has only been a moderate increase in the average deal value. As in previous years, upstream asset deals continued to be the time in developing highly prospective African blocks through the production. In North Africa, a marginal improvement in the political stability led business. indigenous African oil and gas players to increase their presence. to continue. interest in the region. Although transaction value and volume 2011 to 20 in 2012, although aggregate deal value fell to Karoo basin as companies pursue shale gas production in the coming years. further high-value transactions in West Africa and for these to once to farm out to larger, better-funded companies as these 20 Global oil and gas transactions review 2012

21 » Australia starved of opportunity, and as a result, the number of deals the period, the value of Australian oil and gas transactions more the lure of large, unconventional resources. Buru acquired more Australia. The potentially large shale gas opportunity in the proven in to further develop these assets. central Australian basins is likely to increase investment activity in as a result of equity capital markets remaining relatively tight. Global oil and gas transactions review

22 » been very active. Much of the activity can be attributed to the focus increased interest and the unconventional oil and natural gas production, transportation and infrastructure constraints, increased environmental regulations, governing foreign investment. business abounded. considerable attention from regulators, policy makers, media and center stage. robust in relation to deal values, led predominantly by the upstream portfolio rationalization activities. interest from both private equity and strategic acquirers. 22 Global oil and gas transactions review 2012

23 need to generate yield for investors. economic return is higher due to the commodity pricing environment. Back to business basics. Unconventionals have changed the energy dynamic. tight oil and the oil sands are seen as fundamentally changing the companies deploy their capital. North American unconventionals, in particular, continue to attract more attention, especially in light of ongoing global geopolitical concerns. Technology is the name of the game. Whether operating in geological formations. Technological advances have made the People are everything. Assets will be priced with a far greater appreciation of underlying risks. This is especially true given the geopolitical increased discount applied to assets in these challenging high as foreign investors continue to be attracted to long-life reserves and the stable economic, regulatory and political cultural and business differences. These factors must be considered and properly managed in order for all parties involved to succeed in global best practices to further improve operational performance. is really obtained through the effective integration of the business post-close, as opposed to the purchase price. Global oil and gas transactions review

24 » events in oil and gas transactions. The deal value of transactions in operations in West Africa by acquiring stake in the geological 24 Global oil and gas transactions review 2012

25 » the region. offers investors opportunities such as mature basins, particularly in requirements are anticipated to increase liquidity around more has been involved in developing, should help make transactions more deliverable, especially for large companies divesting to smaller ones. midstream segments as a result of both capital rationalization by the incumbents and the regulatory requirements of unbundling in some countries. through formal insolvency offered potential strategic investment underlined both the need for creativity to succeed in a competitive trade players, 2012 has seen a real return to the market from private equity investors, both generalist funds and more specialized energy investors. capital markets continued to play a vital role in supporting the oil Global oil and gas transactions review

26 » overseas investment to acquire stakes in natural gas assets to meet rising domestic demand. transaction activity is more notably outbound. stakes in upstream assets in politically stable countries, particularly unconventional plays in North America, Australia and the North continued focus on the North American unconventional resources, 26 Global oil and gas transactions review 2012

27 including the full tender rig organization for an enterprise value Besides securing energy resources, Asian oil and gas companies, upstream and midstream segments fueled the rise, accounting for Outlook opportunities. A number of companies have signaled their intention to acquire additional overseas assets. Additionally, the Japanese engage in further deals or partnerships to secure access to Global oil and gas transactions review

28 » India demand of oil and gas. To augment domestic production and increase the availability of oil and gas, the government of India is considering changes to its policies to attract foreign investment. companies, are adopting strategies to increase their international footprint, mainly in the upstream segment. The underlying theme around most of the deals concluded in 2012 has been on securing assured oil and gas supplies and developing the domestic natural. Total reported oil and gas transaction value dropped in 2012, deal activity, in terms of the number of deals, declined in In one of the largest foreign investments by an Indian company, increase domestic production of oil and gas. to secure assets abroad. countries. of Indonesia. 28 Global oil and gas transactions review 2012

29 Key focus areas continue to be investments in the natural gas proposed along the southern coast of India, given the rising eastern and southern coasts of India. availability of gas, Indian companies are actively looking to secure distribution company in India. rubber per year in Jamnagar, involving an investment of Outlook given the various initiatives to augment energy security in the time, outbound deals are likely to increase as Indian companies step up plans to acquire oil and gas assets abroad. Global oil and gas transactions review

30 » transactions. Although deal values for the region represented only accurately represents limited opportunities in this space. In state participation in this sector, there is little, if any, availability in the market. It may be some time before value chains in the involvement. transactions, although investors have become more realistic about regional upstream companies prepared to invest heavily in increases prices and may affect long-term returns. While Iraq can 30 Global oil and gas transactions review 2012

31 » softening in 2012 versus modest deal activity in 2011, but still global oil and gas transaction values and volumes during 2012, closed transactions involving the consolidation of names such as advantage of continued capital needs of certain industry players smaller deals in 2012 versus Lastly, midstream sector deal robust in 2012 versus recent years other than 2011, as midstream investment activity. favorable given current market dislocation dynamics. The increasing environmental requirements, shifting supply trends shuttered capacity in certain geographies continue to provide an in North America. industry. We believe these factors and the related uncertainty stockpile of corporate and energy private equity funds targeted to potentially provide a fuel for continued increased oil and gas deal balancing factors, all signs continue to point to an uncertain investment and transaction environment for the overall oil and Global oil and gas transactions review

32 Our Global Oil & Gas Transaction Advisory Services contacts: Americas Australia India Japan More Ernst & Young Oil & Gas publications available at ey.com/oilandgas A quarterly update of our analysis of the performance of the AIM reserves study This report presents the Assurance Transactions Advisory About Ernst & Young are united by our shared values and an make a difference by helping our people, achieve their potential. organization of member firms of company limited by guarantee, does information about our organization, please How Ernst & Young s Global Oil & Gas Center can help your business The oil and gas sector is constantly changing. Increasingly uncertain energy policies, and climate change all present significant the mobility of our global resources and and compete more effectively to achieve its potential. regular survey of senior companies around the You can also connect with us using social media: is the latest in a series management reports published by This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.