Ashurst: Oil and gas firms gear up for wave of M&A activity as oil prices stabilise
Oil and gas firms are gearing up for a wave of mergers and acquisitions activity which will sweep across the world this year.
The industry expects deal volumes to swell by 50 per cent year-on-year in 2016, rising substantially on a three to five year horizon, according to a report released today by City law firm Ashurst.
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Lower for longer oil prices could mean small to mid-sized firm pursue cost savings through strategic mergers, it said. In the event of a sustained recovery, improved revenues and more fluid debt markets could spark a flurry of acquisitions.
Crude has risen from multi-year lows of below $28 per barrel in January, to hover around $50 today. Recently a number of investment banks, from uber bear Goldman Sachs to Citigroup, have become more optimistic about the black stuff's outlook.
"The attitude of oil and gas companies can be summed up as defiant in the face of adversity during the last 18 months. As they shift from survival to growth, the key challenge for companies now is to operate sustainability in a low price environment," Philip Thomson, a partner in oil and gas at Ashurst, said.
Read more: Opec boss warns world needs $65 oil to avoid price shocks
"It was interesting to discover through our research that the vast majority of the industry is not expecting a fast recovery in commodity prices, meaning companies need to continue to find ways to effectively manage their balance sheets and risk profiles, while funding growth projects and increasing the profitability of their businesses."
The report, from survival to growth in a new era, compiled the views of chief executives, chief financial officers and general counsels from more than 50 of the world’s largest oil and gas companies.