Sealing deals: Energy M&A activity set a record in 2012

Fear of the fiscal cliff and the prospects of a second Obama administration helped drive a record $254 billion in energy industry merger and acquisition deals last year, according to a new report.

“Many sellers were motivated to complete deals in advance of the uncertainties surrounding the second term of President Obama and the implications of U.S. governmental policy changes regarding the fiscal cliff,” said a report issued Monday by energy research firms PLS and Derrick Petroleum Services.

More than 670 deals were brokered in 2012, and deal values were 50 percent higher than the previous year, as energy companies around the world jockeyed for position in a climate of high oil prices, depressed natural gas prices, the growth of emerging economies and President Barack Obama’s re-election in November. Concerns that his second term will bring costly new regulation prompted some deals, the report suggests.

The pace of the deals picked up in the fourth quarter, with 181 completed in the October-December period.

The value of the deals beat the previous record of $212 billion in 2010, according to the report.

Three transactions accounted for almost 40 percent of the 2012 total, according to values listed in the report:

* The sale of the Russian joint venture TNK-BP to that nation’s state-owned Rosneft for $62 billion.

* The purchase by China’s state-owned CNOOC of Canadian oil and gas producer Nexen for $18 billion.

* Arizona- based international mining company Freeport-McMoRan Copper & Gold’s purchase of Houston independent oil and gas producer Plains Exploration and Production for $17.2 billion.

The prospect of stable, relatively high oil prices helped push deals along by giving both sides of negotiations confidence about future costs and revenues, PLS and Derrick Petroleum Services reported.

For those who missed out the 2012 deals, there’s still hope.

The report said several factors will contribute to continued merger activity this year, including growing U.S. oil and gas production; continued recovery of Gulf of Mexico activity after the 2010 oil spill; big oil and gas discoveries in East Africa; and natural gas demand from Asia.

More than $85 billion of oil and gas assets were listed for sale as of Jan. 1. “New large deals in the pipeline,” according to the report, include ExxonMobil’s plan to sell 60 percent of a southern Iraq oilfield, Murphy Oil’s vision to let go of certain Canadian assets and Total’s continuation of its divestment program.