Uncertainty over oil and gas prices dampened deal making in 2013

HOUSTON — Uncertainty about oil and gas prices led energy companies to avoid big ticket transactions in 2013, tending toward smaller deals, according to a new study.

The value of global mergers and acquisitions announced in the industry declined to $337 billion last year, a 20 percent drop from 2012, according to an EY study on global oil and gas transactions.

Companies probably put a number of potential transactions on hold until future oil and gas patterns become clearer, wrote Andy Brogan, EY’s global oil and gas transaction advisory services leader.

But these delays also mean  a record number of potential buys may be waiting  in the wings. 

“As a result, the inventory of assets either officially or unofficially on the market has reached historically high levels,” Brogan said in a written statement.

The total number of oil and gas transactions dropped in 2013 to just under 1,400 transactions from a little more than 1,800 transactions in 2012.

Upstream transactions accounted for about 70 percent of deal activity in 2013, the EY report said.  Meanwhile, downstream deals were particularly hard hit.  There were only 109 downstream deals announced in 2013, with a total value of about $14 billion, down from $47 billion in 2012.

The Eagle Ford was the most popular location for upstream transactions, attracting $8.8 billion in upstream oil and gas deals in 2013. It was also the site of the largest energy deal of 2013, Devon Energy’s $6 billion Eagle Ford land grab announced in November.

In West Texas, unconventional regions of the Permian Basin generated $7.5 billion in new deals in 2013.

Midstream deals were the brightest sector in the industry, growing to $70 billion in deal value, up from $60 billion in 2012. Part of this growth was driven by the master limited partnership corporate structure that many pipeline companies use, which relies on acquisitions for its growth, the EY report said.

Brogan said investment growth in the midstream sector likely will continue as long as more traditional investments offer relatively low interest rates.

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