The leading independent portfolio management consultancy specialising in Acquisition, Advisory & Divestment Services for the upstream international oil and gas community.
London - 08 July 2010
The Oil Council's 'On the Spot' Question of the Month posed to Stellar's Dave Fassom
you except an increased wave, a stagnant lull or sporadic activity of
new M&A/A&D transactions in Q3 and Q4 of 2010?"
"Whilst there has been a limited amount of very large corporate transactions in the first half of 2010 there has been a steady flow of smaller opportunities in the marketplace. The larger transactions are driven by a need to focus capital on core projects such as shale gas (in the US) and other capital-intensive ventures. Whilst the rationale for smaller deals is also driven by capital discipline and a need to focus, many are on offer due to a complete lack of capital by the seller.
With respect to the next six months Stellar sees very little change (and certainly no downturn) in the sub-USD 100 million market where capital for developments, exploration etc. will remain very tight indeed. This will ensure that projects that require investment (particularly those that involve some reservoir or political risk) will continue to come into the market in a fairly steady flow.
In the mid-sized part of the market we see much more enthusiasm and willingness for companies to consider mergers. In particular, many of those with market capitalisation of less than USD 500 million are actively looking at the acquisition or merger with other companies that would benefit from being part of a larger entity. Stellar expects continuing deal flow and news on the back of this model with the mergers of Bridge and Silverstone, Norse and Pan Petroleum and Afren's acquisition of Black Marlin as just a few examples.
In the larger sector of the market we expect the market to be dominated by BP sales which will draw in funds from many of the larger oil and gas Majors and large Independents. This will inevitably impact the availability of finance for other deals and may precipitate some of the buyers of BP's assets to sell their non-core assets to raise capital for the purchases. We also feel that the pace of overseas growth of some National Oil Companies will slow and several may retrench back to home markets as projects compete for precious capital.
From Stellar's perspective, after 11 years of working as an independent advisor in the upstream M&A/A&D market, we are currently experiencing our highest ever level of deal-flow through our business and see no evidence of things slowing down."