Covid-19 Driven Oil Price Collapse Puts the Brakes on Global Upstream M&A
Finbrook recently released its Q1-2020 Global Upstream Oil & Gas M&A Review, which reflects the significant challenges being faced by the international oil & gas sector and the broader world economy due to the Covid-19 pandemic. The extreme distress in the global upstream sector is clearly evident from the freezing up of U.S. and international M&A and A&D markets, which saw total U.S. deal value during Q1-2020 drop to just US$1.95 billion, a 90% fall compared to the 3-year average for the first quarter. International deal value dropped to US$5.7 billion this year in comparison to the 3-year average of around US$17.3 billion.
Aggregate deal value for both the U.S. and international segments would have been much lower if not for just two deals in particular — Carl Icahn’s purchase of an additional ~US$963 million worth of Occidental Petroleum stock, raising his minority stake in the company from 2.5% at the end of last year to around 10%, and Rosneft’s sanction skirting sale of its Venezuelan assets to the Russian Government, a deal valued at approximately US$3.9 billion.
The report provides an overview of the top 10 U.S. deals during the first quarter, which notably included three bankruptcy related sales — BCE-Mach III’s acquisition of Alta Mesa Resources’ Anadarko Basin assets for ~US$225 million, Alpine Energy Capital’s purchase of Approach Resources’ Permian Basin assets for ~US$193 million, and KeyBank’s acquisition of EdgeMarc Energy’s Marcellus natural gas assets for ~US$90 million. Significant international deals during Q1 included Premier Oil’s acquisition of BP’s interests in the Andrew Area and Shearwater assets in the UK Central North Sea for US$625 million, and SK Group’s acquisition from Santos of a 25% interest in the Bayu-Undan Gas Field and Darwin LNG Project in Australia for US$390 million.
The rapid deterioration in market conditions since late February due to the Covid-19 crisis is likely to result in the renegotiation or even termination of deal agreements signed earlier in the quarter prior to the steep drop in oil prices. However, Finbrook anticipates a significant rise in the deal activity during the second quarter or third quarter of 2020 and beyond, largely driven by distressed or bankruptcy sales.
You can click here to download Finbrook’s Global Upstream Oil & Gas M&A Quarterly Review – Q1-2020 Summary Report.