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2012 global deal values reach record $254 billion

Brian Lidsky, PLS Inc., Houston

PLS Inc. in conjunction with our international partner Derrick Petroleum Services reports that the global oil and gas M&A market for upstream deals surged 50% higher in 2012 to a record $254 billion, eclipsing the prior high water mark of $212 billion in 2010. Globally, the number of deals with values disclosed decreased 20% to 679 in 2012, compared to 842 in 2011 and 684 in 2010.

Three mega deals in 2012 account for $97 billion; Rosneft's $62 billion buy of TNK-BP, Freeport McMoRan Copper & Gold's $17 billion buy of Plains E&P and CNOOC's $18 billion buy of Nexen Inc. In fact, Rosneft's late October buy of TNK-BP represents the second largest oil and gas deal recorded, behind Exxon's $82 billion purchase of Mobil in 1998. Excluding these three deals, the 2012 market would be $157 billion – on par with the prior five-year annual average of $160 billion.

During the fourth quarter 2012, the deal markets surged with an unusual high level of activity resulting in 181 deals for $137 billion. Many sellers were motivated to complete deals in advance of uncertainties regarding President Obama's second term and US policies regarding the fiscal cliff.

Also helping drive a high level of activity throughout 2012 was a remarkably stable WTI oil price which nearly mirrored the oil price path of 2011 and remained in a band of $80 to $110 per barrel.

In the United States, the return of normalcy in the Gulf of Mexico throughout the year is perhaps best punctuated by Freeport McMoRan Copper & Gold's December surprise buy of both Plains E&P ($17.2 billion) and McMoRan Exploration ($2.4 billion). The deal announcement came just short of three months after Plains E&P made a bold and transformational $6.1 billion buy of GOM assets from BP and Shell. It also came as McMoRan Exploration saw its stock take a beating while struggling to test its major, ultra-deep Davy Jones #1 discovery on a 20,000 acre structure beneath SMI 230. Despite the operational challenges, MMR has a leadership position in the shallow water, ultra-deep sub-salt play and has unrisked resource potential of over 50 Tcfe. PLS estimates that FCX acquired PXP for $3.00 per Mcfe proved and MMR for $4.17 per Mcfe proved.

In Canada, CNOOC finally received a green light from the Canadian government for its acquisition of $17.9 Nexen Inc. At the same time, Malaysia's Petronas also got approval for its June $5.8 billion acquisition of Progress Energy. The approvals, however, came with a caveat from Canada's Prime Minister who stated, "Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend."

Also highlighting 2012 is the unabated global buying spree being undertaken by Chinese and other Asian NOCs. Buyers of big-ticket deals in 2012 include CNOOC, PetroChina, Sinopec, ONGC, Petrona, Pertamina and PTTEP. Also active are Japanese companies including Marubeni, Mistubishi, Mitsui, Toyota and Osaka Gas.

In terms of 2012 deal values, the United States led with $83 billion, followed by the FSU with $75 billion and Canada with $50 billion. In terms of deal counts (2012 total equals 679), the United States also leads with 299, followed by Canada with 194. Other global hotspots include the North Sea (40 deals), Australia (22 deals), Russia (15 deals) and Colombia (14 deals).

PLS expects 2013 deal values to moderate back to normal levels. Currently, we tally over $85 billion of assets for sale globally with large recent announcements including ExxonMobil's intent to sell 60% of the West Qurna-1 oilfield in southern Iraq, Murphy Oil selling select Canadian assets and Total continuing with a multi-billion dollar non-core divestiture program.

PLS Inc., Monthly Deal Monitor - Select transactions 11/17/12 -12/16/12

PLS Inc., Monthly Deal Monitor - Select transactions 11/17/12 -12/16/12

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