NORWALK, Conn., Jan. 16, 2001 — Global energy industry merger and acquisition transaction values dropped in 2001 to $243.5 billion, down 8 percent from $264.4 billion in 2000.
The drop, according to energy research firm John S. Herold Inc., was triggered by a 24 percent decline in upstream global merger and acquisition (M&A) transaction value to $81.5 billion.
U.S. implied reserve values climbed to US$6.99/boe and Canadian values soared to US$6.55/boe, both record highs since Herold began tracking global upstream M&A activity in 1988, according to senior vice president Christopher Sheehan.
“North American implied reserve values climbed with commodity prices through 2000 and into 2001, but continued to remain elevated despite falling oil and gas prices later in the year.” Sheehan said. “The widening gap between what sellers were asking and what buyers wanted to pay resulted in North American deal volume declining nearly 15% in 2001.”
With North American implied costs so high, Herold found that buyers increasingly turned their attention to the much lower implied reserve values for assets in higher risk/higher reward frontier areas. Overseas deal volume rebounded in 2001 from a five-year low, accounting for 43% of transaction value compared with just 17% in 2000.
In other segments of the global energy industry, Herold found that worldwide power industry transaction value dipped slightly in 2001 to $82.6 billion from $84.8 billion in 1999. Huge U.S. refining mergers caused downstream M&A transaction value to jump to $35.4 billion in 2001 from $19.9 billion the preceding year. Gas pipeline deal value fell by more than half as total midstream activity declined to $22.3 billion in 2001 from $32.3 billion in 2000. Consolidation in the oilfield equipment and services sector drove deal value to $20.1 billion from $16.7 billion in 2000. Coal transactions in 2001 totaled $1.4 billion.
John S. Herold’s comprehensive energy M&A Database revealed that the proposed Phillips/Conoco merger was by far the biggest upstream transaction at $25.9 billion. Conoco’s acquisition of Gulf Canada was second at $6.5 billion. Duke Energy’s purchase of Canadian Westcoast Energy topped all midstream deals at $8.4 billion, while Phillips’ $9.8 billion acquisition of Tosco was the biggest downstream deal. The takeover of Italian firm Montedison by Eletricite de France and Fiat led the power listings at $15.3 billion, followed by E.ON’s acquisition of Powergen for $13.3 billion. The merger of drillers Sante Fe International and Global Marine led oilfield equipment and services activity at $3.7 billion.
Initiated in 1988, the John S. Herold M&A Database contains data and analysis of every significant international energy transaction. For information about John S. Herold Inc., call Account Services at (203) 847-3344 or email [email protected]