Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: In Upstream Energy, Corporate M&A Languishes, Asset Deals Flourish
December 9, 2013
Where is all the energy M&A? This is a question we often hear from investors. Against the backdrop of record-setting M&A transactions in other industries (e.g., telecom), along with robust oil prices and broadly supportive capital markets, it does sometimes seem, at least superficially, that energy M&A has been lacking. In this Stat, we focus on the upstream segment of the oil and gas sector (i.e., exploration and production), and indeed it is true that there has been a lack of blockbuster upstream deals to write about lately. That, however, is true in only a narrow sense: What has been slow is corporate M&A. In aggregate, though, M&A activity has actually been quite robust: 2012 set an all-time global record (in dollar terms), and 2013 was at the third-highest level ever. In other words, asset transactions, rather than corporate deals, are what's driving M&A these days. This represents a big shift from the 2005-2009 period, when corporate M&A generally comprised the bulk of the total. In this Stat, we quantify this historical shift in upstream M&A, explain the reasons behind it, and discuss what it means for energy investors.
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
There is no assurance any of the trends mentioned will continue in the future. Past performance is not indicative of future results. Investing involves risk and investors may incur a profit or a loss. Specific sector investing can be subject to different and greater risks than more diversified investments. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.
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