2016: M&A WILL UP
A desire to capitalise on distressed situations, grow international market share and acquire new technology will drive a surge in M&A activity in the global oilfield services sector during 2016, according to major new research from international law firm Pinsent Masons.
The survey of 200 senior executives across the oilfield services industry has revealed that 86% of respondents expect a surge of deal activity in the next 12 months amid unprecedented price volatility. 70 % said they were actively considering an acquisition within the next 12 months.
Seventy four per cent pinpointed expansion of overseas operations as the main driving force behind deal activity, with 70% expecting opportunism around distressed assets to drive deals and 60% eyeing technology-driven consolidation. Corporates operating in the offshore technology and equipment segments were seen as the most attractive targets.
Respondents revealed that Singapore, Mexico, Indonesia, China and Nigeria are the most attractive emerging markets with falling valuations and new strategic deal structures presenting lucrative investment opportunities against the backdrop of continued oil price volatility.
In more mature markets, two thirds (67%) of respondents said the UK would be likely to yield opportunity for buyers over the next three years.
Notwithstanding that, the report reveals optimism in the industry with an overwhelming 96% predicting UKCS recovery to 'peak' levels of profitability. Almost half (48 per cent) expect the UKCS to rebound within five years, while over a quarter 28 per cent predict recovery within three years, subject to a general improvement in oil price.
"The new landscape is very different from other downturns," Bob Ruddiman, head of energy at Pinsent Masons, says. "We are in a more complex world where supply and demand and significant geopolitical events conspire with unpredictable consequences. Despite that, it's encouraging to see a sense of long-termism in the sector as oilfield services companies seek to find opportunity amid the undoubted challenges."
David McEwing, a partner in the oil and gas team at Pinsent Masons, feels that much of the discourse around oil and gas deals has focused on the majors and how they will respond to a more volatile environment. "However it shouldn't be forgotten that the global oilfield services sector is on course to be worth USD144bn by 2020, and is a significant employer and wealth creator," he adds.
"What our research shows is an industry on the cusp of transformation. Corporates are clearly looking to build out their international propositions and invest in technology which will maximise efficient recovery. It's no surprise that the UK stands out in that regard given the industry's focus on innovation and deep sea exploration – not least when we're seeing more of those types of projects in Asia.
"That said, there's no complacency and boards are clearly focusing hard on their corporate strategies. Yes, there's challenge but for some that means a chance to challenge the status quo in a dynamic market."
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AN - China National Offshore Oil Corp. (CNOOC) is willing to invest $3 billion in its existing oil and gas operation in Nigeria, the Nigerian National Petroleum Corporation (NNPC) said on Sunday following a meeting with the Chinese in Abuja.
REUTERS - Production at Libya’s giant Sharara oil field was expected to fall by at least 160,000 barrels per day (bpd) on Saturday after two staff were abducted in an attack by an unknown group, the National Oil Corporation (NOC) said.
IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.