The value of global upstream oil and gas M&A deals tumbled to $7.1 billion during Q1 2015, a drop of 79% compared to the value in Q1 2014 and a drop of 85% compared to the average value per quarter since the start of 2009. The oil price as per the WTI benchmark started the year at $52 and has moved little since. With Saudi supply policy showing no signs of shifting, large U.S. stock inventories persisting and further supply side pressure from a potential resolution to sanctions on Iranian exports, the chances of a sharp increase in oil price in the near future are slim.
In the medium-to-long term commodity prices will inevitably return to a semblance of levels seen in the past 5 years as cuts in exploration and development drilling translates into a restoration in the oil price, closer to the required break-even level to sanction new development projects. For any well-capitalized company, this quarter could have been seen as a rare opportunity to acquire oil assets at a steep discount to historical levels. However, with sellers seemingly of an opinion that the oil price is lower than fair value, an impasse has been reached, resulting in the lowest value quarter for oil and gas deals in the 7 years that Evaluate Energy has been tracking all global oil and gas transactions.
By Eoin Coyne
