US Megadeals Play Vital Role in World Oil and Gas Industry

Three megadeals closed in the US within the past year ensured that the global transaction volume for merger and acquisition activities in the oil and gas sector remained high. With a global transaction volume of 151 billion euros, 2014 has been a record-breaking year but with 148 billion euros the year 2015 remains only close behind. With deal volumes of 20, 18 and 16 billion euros respectively, the three megadeals executed in the US made up for more than a third of the total global transaction volume in 2015. Indeed, these transactions were the third, fourth and fifth largest transactions ever recorded in the American market. These are the results of recent studies accomplished by the Centre for European Economic Research (ZEW), based on the Zephyr database of Bureau van Dijk (BvD).

However, the most recent megadeal in this sector, was recorded on European soil (not included in the graph). With a value of around 60 billion euros, the takeover of the Reading-based English BG Group by Royal Dutch Shell in February 2016 was the largest takeover in the oil and gas sector for ten years. While the transaction volume remains high, the number of transactions reported is, however, clearly decreasing.

After 444 transactions in 2014, in 2015 only 264 deals were documented. "This is down to the recently observed cautious behaviour in the industry," explains Niklas Dürr, researcher in the ZEW Research Group "Competition and Regulation". After more than one year of depressed oil and gas prices, the sector has now entered a new period of uncertainty and realignment. Dürr goes on explaining, "as no large price increases are expected in the medium-term, corporations prefer to hold onto their cash, rather than engage in risky ventures."

In addition, especially American fracking firms have incurred large debts as a result of significant investments made in recent years. In case of a takeover, debts must be taken over by the acquirer, which clearly inhibits transfers. According to Niklas Dürr, "this development will result in a cooling-down of  the market following the latest megadeals."

For further information please contact

Niklas Dürr, Phone +49(0)621 1235 386, E-mail duerr@zew.de