Corporate Financing Analysis - Cautious Optimism Towards 2018 UK Oil & Gas M&A Uptick - 29 JAN 2018

With the global oil price outlook steadily strengthening, and with industry interest in the UK Continental Shelf (UKCS) coming back to life, we may well see and increased haul of M&A deals targeting the country's oil and gas industry over the year ahead, and potentially beyond. Furthermore, with the established players in the energy arena looking to divest non-core assets to companies better situated to be investing in those same units to extend field life, the climate is ripe for dealmaking and we expect to see an increase in deal volume rather than a sudden boost in combined deal value.

Coming From A Low Base

According to data from Zephyr, a Bureau van Dijk product, announced M&A activity targeting the UK Oil & Gas industry tallied USD12,273mn last year across 134 transactions. This represented the second annual decline in deal value and the lowest number of deals to be announced since way back in 2003. Activity levels were also down, y-o-y, from the USD19,397mn committed to 159 transactions during the 2016 full-year period. The largest deal of 2017 came in the fourth quarter with Shell UK's disposal of its North Sea Assets to oil exploration services company Chrysaor Holdings for USD6,704.0mn in a leveraged buyout deal. The oil major's North Sea interests include: Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, the Greater Armada cluster, Everest, Lomond and Erskine, and a 10% holding in Schiehallion. BMI notes that the deal was the only billion-dollar deal to target the sector last year, with the second-largest M&A deal of the year coming from commodities investment group HNA Innovation Finance Group with its majority (51%) takeover of petroleum logistics services holding company HG Store International from seller Glencore.

Set To Kickstart
UK Oil & Gas M&A Activity By Deal Value, USDmn
Source: Zephyr, a Bureau van Dijk product

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