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M&A appetite surges in oil and gas sector

Global Capital Confidence Barometer | Oil and Gas | 17th edition

The 17th edition of the Capital Confidence Barometer reveals a stronger-than-expected turnaround in economic activity in the Eurozone, which has boosted executives’ expectations for global economic growth as 95% of survey respondents see the global economy as improving or stable.

With China and the US remaining positive, all the major engines of growth in the global economy are now synchronized in an upward trajectory for the first time since the end of the global financial crisis.

Oil and gas executives are increasingly optimistic about corporate earnings, credit availability for the sector and equity valuations. With the industry on firmer footing, oil and gas companies are in a buying mood, with 69% indicating that they intend to pursue acquisitions, an all-time high in the history of the Capital Confidence Barometer.

 

Supportive market factors, including healthier balance sheets, narrowing of the bid-ask spread, overall consensus on oil price outlook and private equity firms with money to spend are likely to propel M&A during the coming months.

Although M&A, joint ventures and alliances remain important levers to accelerate oil and gas companies’ growth strategies, 64% of executives continue to place the highest importance on their existing operations and products to deliver near-term growth.

As oil and gas companies think about a path forward in a rapidly changing landscape, the majority of oil and gas executives are seeking to take proactive measures to deal with digital transformation. In the past, oil and gas companies have been slow to adopt digital technologies. However, prolonged low commodity prices are driving companies to increase their investment in digital technologies to transform their business models, address the threat from competitors outside of the sector and manage changing customer behaviors.

Although 40% of oil and gas companies are looking to develop digital capabilities in-house to support their digital transformation agenda, many are considering a mix of internal and external capabilities.

Looking ahead, oil and gas executives expect high levels of deal making to continue, with 96% saying they see the M&A market as improving or stable over the next 12 months. While 25% anticipate more cross-border deal making, an almost equal number are bracing for an increase in hostile and competitive bidding as companies focus on growth through acquisitions and private equity returns to the M&A party with more than US$100 billion in untapped capital set aside for energy investments.

William M. Casey

Andy Brogan

+44 20 7951 7009

 

EY Global oil and gas contacts

Jon Clark

+44 20 7951 7352

Mitch Fane

+1 713 750 4897

Sanjeev Gupta

+65 446 654 8287

Barry Munro

+1 403 206 5017


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