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Archive for the ‘Energy’ Category

M&A News From the Energy Industry

By Roy Graham | Dec 10, 2015

energy industryThe US Interior Department recently removed some of the remaining obstacles to Arctic drilling, albeit with a few caveats. Arctic oil drillers must keep active rigs at least 15 miles from wildlife, which could make transport between drilling sites more burdensome. The Arctic contains about 20% the world’s undiscovered oil and gas reserves. Companies, like Shell Oil, can drill into Arctic oil-bearing zones, but not until spill response equipment is available. The equipment needed is currently undergoing repairs and may not be ready until after the arctic drilling season ends. Shell needs spill prevention equipment like a capping stack before the company can drill into the deeper formations, according to The Guardian.

A number of Wall Street analysts are predicting that crude oil is set to stay below $60 a barrel through next year as the market and energy industry struggles to recover from over supply. A survey of 13 investment banks by The Wall Street Journal cut their average forecast for Brent crude, the international price gauge, by $9 to $58.70 a barrel, compared with last August’s survey. For West Texas Intermediate, the U.S. oil marker, the average forecast is for $54.40 a barrel, also down $9 from August.

Industry Indicators

  • The average US retail price for diesel and regular gas, which influences profitability for oil and gas companies, fell 30.9 percent and 27.13 percent, respectively, in the week ending October 13, 2015, compared to the same week in 2014.
  • The spot price of crude oil, which affects profitability for oil and natural gas operations, fell 45 percent in the week ending October 9, 2015, compared to the same week in 2014.
Posted by Roy Graham.

Energy Sector M&A News

By Roy Graham | Sep 03, 2015

Wind turbineWhen oil prices fell in late 2014 many companies in the energy sector dealt with the issue by thinning out operations – cutting overhead, limiting capital expenditures and reducing staff. The moves were done cautiously as no one knew how long the drop would last. Now, more than half a year later, the environment is still tenuous, which may lead to a number of distressed sales as business owners rely on M&A as a means to avoid trouble with creditors.

The energy sector performed the best of all sectors in the second quarter of 2015. A composite of energy commodities rose 13.81% and was the strongest commodity sector in the futures markets for Q2. However, there has been a dramatic change in Q3 as the price of oil has drifted below $40 per barrel. Brent crude oil spot prices decreased by $5 per barrel in July to a monthly average and fell even further at the end of July and into early August. The current values of futures and options contracts continue to predict a prominent level of uncertainty in the price outlook, which will most likely lead to a very cautious environment for perspective acquirers. Some experts predict that the current record level of inventory will cause prices to settle back down again, and that 2015 will end with West Texas Intermediate (WTI) prices at about $50 per barrel. However, with so much volatility and uncertainty most experts are not willing make predictions.

Posted by Roy Graham.

Read the Entire Energy M&A 3rd Quarter Newsletter Here

M&A News in the Energy Sector

By Roy Graham | May 01, 2015

Oil BarrelsFalling oil prices in the energy sector are affecting valuations. Many owners are reluctant to test the M&A market as valuations have dipped significantly over the past six months.  Buyers, on the other hand, see the current market climate as an opportunity to acquire good companies at reasonable multiples. According to data published by Fitch Ratings, low prices for an extended period could lead to more acquisitions of smaller, potentially distressed companies by larger ones, while reducing the major oil companies’ ability to finance their operations through disposals. The combination of lower operating cash flows, fewer disposals and some potential acquisitions could put major oil companies’ credit metrics under pressure. However, the impact would depend on how they respond, as some might choose to cut capex and exploration expenses, while others might decide to operate with higher leverage, which could lead to downgrades if sustained. There has been a large number of private equity backed energy companies formed over the past five years capitalizing on the fracking trend. Many of these companies have significant debt to service, which could spark a flurry of M&A activity – even if multiples are lower than many of the sellers would like.

Industry publication World Oil’s annual forecast and review predicts that West Texas Intermediate crude oil prices will average about $55 per barrel in 2015. If this comes to fruition, exploration projects that require crude prices of more than $50 per barrel to break even, such as Arctic drilling and crude exploration in Canada, will likely lose funding. Shale drilling in North America is also expected to decline. New well activity in Texas, which leads the US in oil production, is expected to fall nearly 24 percent in 2015. Louisiana, North Dakota, and Oklahoma are also expected to see declines. Overall, US drilling is forecast to fall by nearly 20 percent in 2015.

Posted by Roy Graham.

Read the Entire Energy M&A 2nd Quarter Newsletter Here

Energy Sector News

By Roy Graham | Feb 27, 2015

Energy Sector NewsAccording to First Research’s energy sector news,  the recent drop in crude oil prices is putting pressure on larger US producers to scale back on fracking operations. Fracking has been a huge boon to US oil production in recent years, but as prices fall, costs remain high, and the return on investment has diminished. ConocoPhillips recently announced it will cut back drilling operations and exploration spending. Shell also plans to reduce spending and cut employment. Smaller oil companies with lower cost structures are continuing to profit from fracking, but margins may be squeezed if oil prices continue downward, a scenario some experts say is likely given Saudi Arabia’s plan to keep production high. Unlike US producers, Saudi Arabia is able to profit from oil even if prices reach $30 per barrel, according to Forbes.

New Canadian rules for rail transport of oil and ethanol could boost operating costs for oil producers. Tighter regulation came nearly a year after a train derailment in Quebec killed 47 people, prompting regulators in Canada and the US to pursue tighter regulation of oil tank cars. The new Canadian rules, issued in April 2014, call for railroads to develop emergency plans for responding to explosions; the rules also fast-track the retirement of older tank cars and require the adoption of stronger tank cars within the next three years. Prompted by Canada’s moves, regulators in the US are working to update their tanker rules, which have been in dispute for years. US regulations are likely to call for stronger tank cars, reduced speeds for trains carrying oil or ethanol, and safer routes for trains carrying more than 20 tank cars.

Posted by Roy Graham.

Read the Entire Energy M&A 1st Quarter Newsletter Here

Q4 Energy M&A Update

By Kim Levin | Nov 14, 2014

Oil PumpM&A activity for North American based target companies in the energy sector for Q3 2014 included 117 closed deals and total deal value of approximately over $8.13 billion, according to data provided by S&P Capital IQ. 

Q3 2014 was a quieter period for global oil and gas M&A activity compared to the previous quarter, but this year is still on track to have a greater total M&A spend than 2013. North American activity grew for the fifth consecutive quarter fueled by unconventional oil resource plays in the Permian Basin. M&A activity in the Permian Basin has been on the rise since Q1 2014. For 2014, acquisitions in the Permian Basin made up nearly half of the total E&P deal value in the U.S. and just under a third of total E&P deal value worldwide at around $11.2 billion. North American gas exports, gas assets are also becoming more and more marketable.

Read the Entire Energy M&A 4th Quarter Newsletter Here


Q3 Energy Industry Newsletter

By Kim Levin | Sep 12, 2014

ENIPG-Deep Sea Oil RigM&A activity in the Energy sector for North American based target companies in Q2 2014 included 143 closed deals according to data provided by S&P Capital IQ.  According to a report from Mergermarket, an industry research group, the average deal value was up more than 60% compared to Q1 driven primarily by energy producing targets. Other strong sectors for energy M&A included oil and gas field services companies and exploration companies. Strategic buyers were particularly active in the space looking to gain market share and new technology by purchasing high growth companies.

Read the Entire Energy M&A 3rd Quarter Newsletter Here

Q2 Energy Mergers & Acquisitions Update

By Kim Levin | May 02, 2014

Solar PanelsM&A activity in the Energy sector for North American based target companies in Q1 2014 included 161 closed deals according to data provided by S&P Capital IQ. Despite the flurry of activity, M&A in the energy sector has declined year-on-year since 2012 according to data published by industry tracker MergerMarket. The total deal value of $15 billion in Q1 2014, was the lowest valued quarter since Q3 2009 ($13.3 billion) and was a 57% decrease from Q1 2013 ($36.3billion). According to a report from international consulting firm PriceWaterhouseCoopers, after a slow year in the energy sector for M&A in 2013, deal activity should surge in 2014 driven by improved technology, greater financing capabilities and political sentiment moving toward a greener world. According to a report from British Petroleum, primary energy demand is expected to increase by 41% between 2012 and 2035, which should spark continued M&A as companies vie for market share.

Read the Entire Energy M&A 2nd Quarter Newsletter Here

Energy Q1 M&A Update

By Kim Levin | Feb 28, 2014

Wind turbineM&A activity in the North American Energy sector for Q4 2013 through Jan. 28, 2014 included 325 deals announced or closed according to data provided by S&P Capital IQ. There is reason to be optimistic regarding M&A in the sector for 2014 and beyond. While the North American market continues to pose challenges, there is always an appetite in consolidating profit-generating entities. Further, despite a modest recovery in the price of natural gas and the retirement of some coal-fired plants, the dynamics of wholesale supply and demand continue to lead lower forward power price curves. Private equity continues to have strong interest in the space driven by utilities and ancillary services relating to oil and gas.

Read the Entire Energy 1st Quarter Newsletter Here

Energy M&A Activity Update

By Kim Levin | Dec 20, 2013

Oil PumpM&A activity in the North American energy sector in the third quarter of 2013 was active with 222 deals announced or closed in the period according to data provided by S&P Capital IQ. The most active energy subsector included oilfield services and midstream assets as new pipelines, oil terminals and crude-by-rail infrastructure grew to accommodate the mounting levels of US oil production and incremental demand for gas.

Read the Entire Energy 4th Quarter Newsletter Here

Energy M&A Activity Update

By Kim Levin | Sep 27, 2013

Wind turbineAccording to a report from Price Waterhouse Coopers (PwC), a leading global consulting firm, M&A activity for the energy industry was down in the first quarter of 2013. There were a total of 39 energy deals with values greater than $50 million, accounting for $17.2 billion in deal value, a decrease from the 53 deals worth $30.4 billion in the second quarter of 2012. On a sequential basis, deal volume in the second quarter dropped by five percent compared to the first quarter of 2013, with deal value falling by 37 percent during the same time period.

Divestitures drove U.S. energy mergers and acquisitions activity in the second quarter of 2013, according to PwC. Upstream deals accounted for 22 transactions, representing 56 percent of total deal volume totaling $6.4 billion. Additionally, there were 10 midstream deals, accounting for 26 percent of total deal volume in the quarter worth a total of $6.2 billion.

Read the Entire Energy 3rd Quarter Newsletter Here