Energy deals plunge to 5-year low in 2013

HOUSTON – Oil and gas producers worldwide bought fewer assets in 2013, bringing merger and acquisition activity to its lowest level in five years, according to a new study.

Deals to buy companies and assets dropped to $136 billion, down 46 percent from 2012. That year, upstream companies across the globe struck $250 billion in deals, the highest point in a decade, according to an IHS energy M&A research report released Thursday.

In 2013, energy companies instead funneled their money into developing their huge stockpiles of reserves and acreage.

“There’s such a huge inventory of reserves that need to be developed” after oil and gas companies spent $600 billion on deals from 2010 to 2012, said Chris Sheehan, director of energy M&A research at IHS, in an interview Friday. “It’s a global dynamic.”

Buyers and sellers also remained disconnected on price expectations throughout the year, though deal activity ramped up in the second half of 2013 as political and economic uncertainties began to clear, Sheehan said.

Though Chinese state-owned companies spent less in 2013, they snapped up property in the Caspian region, in North America and in Africa and accounted for a larger percentage of the year’s oil and gas buyers than in 2012 because of the overall drop in deal activity. India’s state-owned oil companies followed China closely as the second-largest buyer, Sheehan said.

Foreign buyers bought fewer new assets in North America, where much of the board is set after an American land rush that lasted until 2012. IHS said producers snapped up a record $200 billion worth of unconventional assets between 2010 and 2012, but that spending was slashed in half last year to $40 billion.

Sheehan said IHS will release a report in March forecasting M&A trends in 2014.

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