Upstream mergers and acquisitions activity hit $232bn in 2012, says study

Scotland-based energy and mining research consultancy group Wood Mackenzie has said that a record $232bn was spent on upstream mergers and acquisitions (M&A) activity in 2012.

Major M&A activities that took place in the second half of 2012 include the transactions between Rosneft and TNK-BP, CNOOC and Nexen, and Freeport and Plains, where the total spend was $138bn.

According to Wood Mackenzie the three largest transactions of the year were Rosneft’s purchase of TNK-BP for $58bn, China National Offshore Oil Corporation’s (CNOOC) acquisition of Nexen for about $18.5bn and Freeport’s acquisition of Plains E&P for $17.2bn.

Wood Mackenzie M&A Service manager Luke Parker said that if deals of over $10bn are excluded, the deal spend of $138bn has to be considered strong, but it is less than the record of £178bn achieved in 2010.

"The number of M&A deals was also up year-on-year at 456, but fell slightly short of 2010’s watermark of 466," added Parker.

According to the report, $46.9bn was spent by Asian National Oil Companies (NOCs), with Chinese NOCs the largest spenders.

"CNOOC’s $18.5bn acquisition of Nexen was the headline deal, but in total, CNOOC, Sinopec and PetroChina spent over $31bn in 2012," said Parker.

In 2013 it is expected that Asian NOCs will continue to play a vital role, with a focus on small to mid-size asset acquisitions focused on long life resource themes.

The important areas to watch out for are US tight oil, Canada unconventional gas, exploration-focused corporate M&A and big LNG in East Africa, according to Wood Mackenzie.

Unconventional M&A, which dropped 28% year-on-year, still remained a key theme totalling $45bn in 2012.