Ernst & Young's outlook on 2010 transactions
While 2009 deal volumes were down considerably compared to 2008, with 1,916 energy and power deals completed in 2009 versus 2,351 in 2008, there are clear signs that a new wave of oil and gas transactions is emerging. These will be much less debt reliant and will include IPOs and equity raisings. At this point, potential buyers are concerned about missing compelling opportunities on the upside.
The oil majors are cautiously appraising M&A opportunities that could add high-quality reserves. At the same time, these companies are undertaking portfolio restructuring measures — divesting noncore assets and directing investment to long-term growth projects or regions. Foreign players are becoming more significant in contrast to the fairly stagnant US transactions environment, particularly as China continues to shore up its energy production capabilities.
Energy M&A is expected to accelerate going into 2010; however, it is unlikely that deal volumes and values will return to the levels of 2006-07 and the first half of 2008 in the near term.