In 2022, the global oil and gas resources M&A market performed weaker than expected

In 2022, affected by the soaring geopolitical risks of some important oil-producing countries, the sluggish growth of global oil and gas exploration and development investment, the lower than expected increase in OPEC+ production, and the slowdown in world economic growth expectations caused by the continuous and repeated occurrence of the new crown pneumonia epidemic, international oil prices fluctuated sharply in a relatively high range throughout the year, which had a greater
negative impact on the global oil and gas resources M&A market.

On the one hand, as international oil prices continue to fluctuate at a high level, the global oil and gas resources M&A market tends to be weak in 2022, and the number and amount of M&A transactions are expected to be significantly lower than the level in 2021.
On the other hand, high oil prices have also increased the valuation of traded assets, and market analysts believe that there is a certain valuation premium in some completed M&A transactions
.

According to the latest statistics of Wood Mackenzie, in the first 11 months of 2022, only 7 M&A transactions exceeded $2 billion
.

In terms of the number and amount of transactions, in the first 11 months of 2022, the global oil and gas resources M&A market generally showed a clear trend of "volume and price decline"
.
In terms of deal volume, global oil and gas resource M&A activity fell sharply in the first 11 months of 2022, reaching a total of 194 transactions, far lower than the 242 in the same period of 2021.
In particular, the number of completed transactions in the first half of the year was only 107, the lowest level
in the same period in nearly 10 years.
In terms of deal value, the global oil and gas resources M&A market reached only US$81.
78 billion in the first 11 months of 2022, down nearly 30%
from US$115 billion in the same period of 2021.

From the perspective of transaction evaluation oil prices, according to Wood Mackenzie & Company's calculations, the average oil price of global oil and gas resource M&A transactions in the first 11 months of 2022 was about 57.
22 US dollars / barrel, which was significantly higher than the level of the same period in 2021 (49.
27 US dollars / barrel), but also significantly lower than the average
of the two international benchmark oil prices of Brent and WTI in the first 11 months 。 On the one hand, after a wave of sharp increases in international oil prices in the second half of 2021, the valuation expectations of asset sellers in the global oil and gas resource M&A market generally increased, driving the average oil price evaluation of M&A transactions in 2022 to rise significantly.
On the other hand, although international oil prices have risen sharply in the short term, various factors such as the continuous recurrence of the new crown pneumonia epidemic, the expected decline in global economic growth, and the exploration of renewable energy transformation in the oil industry have led some international oil companies to maintain a cautious attitude towards upstream asset investment at this stage, insisting on focusing on the actual value of oil and gas assets, which objectively limits the sharp rise
in oil prices evaluated by M&A transactions.

From the perspective of transaction area, North America is still the hot spot of the global oil and gas resources M&A market in 2022, with nearly 131 M&A activities in the first 11 months, basically the same as the same period in 2021, of which 12 transactions with a transaction amount of more than US$1 billion were related, most of which were related to shale oil and gas assets; The M&A transaction value was approximately US$65.
45 billion, down nearly 23%
from US$84.
64 billion in the same period in 2021.
The M&A market for oil and gas resources in Africa was also more active in 2022, with 19 M&A transactions completed in the first 11 months, the highest level
in the same period since 2015.
The number of M&A transactions completed in Europe in the first 11 months of 2022 was 20, with Israel's Drake Group's acquisition of Siccar Point Energy's UK assets for US$1.
4 billion and Romanian Gas' acquisition of ExxonMobil's non-core oil and gas assets in the country for US$1.
06 billion, the two largest M&A activities
in Europe in 2022 。 In Latin America, the total value of M&A transactions exceeded US$4.
4 billion, the highest since 2019, despite just nine M&A deals in the first 11 months, and Petrobras became the region's largest seller
this year.

The author believes that although the overall performance of the global oil and gas resources M&A market is weaker than market expectations at this stage, the development will show new changes
in 2023.

First, upstream M&A activity is expected to be active
overall.
In the context of insufficient investment in oil and gas exploration and development in recent years, resulting in a decreasing trend in the discovery of new reserves, obtaining high-quality upstream assets through M&A activities is still an important way for international oil companies to ensure their reserve possession, especially in 2023, the number and amount of upstream M&A transactions will return to the upward trajectory
.

Second, Africa may become a new hot spot
for global oil and gas resource mergers and acquisitions.
In the past decade, Mauritania, South Africa, Tanzania and Mozambique and other countries have found that under the expectation of tight natural gas supply in Europe, African regions with relatively reasonable geographical distance from Europe have good resource potential for future large-scale natural gas exports to Europe, which is expected to attract more upstream oil and gas investment
.

Third, M&A activities related to shale gas assets in North America may grow
.
Under the role of regional supply and demand imbalance in the global natural gas market, the growth of LNG exports in the United States is expected to increase in the next few years, and the price of Henry Hub natural gas will also remain at a historical high, which will further attract some oil companies to increase their holdings of shale gas assets, and it is expected that M&A activities in shale regions where high-quality shale gas assets are widely distributed such as Marcellus and Hayesville will maintain a steady growth trend
.
(China Petroleum News, Sinopec Petroleum Exploration and Development Research Institute, Hou Mingyang)

From January to November 2022, the world's top 10 oil and gas resource M&A transactions