LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

Thematic (Sector/Industry)

Malaysia Energy / Thematic (Sector/Industry)

<p>This note is a flash preview from the results of my analysis ranking the top performers in the global upstream oil and gas M&amp;A market which will be published in full in the upcoming report “<strong>Oil &amp; Gas M&amp;A Update (Part 3): Who Are the Winners in the M&amp;A Market?</strong>”.</p><p>M&amp;A activity in the global oil and gas industry has grown steadily in the last two years. The global deal value rose by 23% in 2017, year on year, to $164bn, while it almost doubled in 2016 to $133bn from $69bn in 2015 if we exclude the one-off $82bn Shell/BG deal. While the oil downturn has forced some companies to refocus their regional activities and reduce their asset base, for other companies it has created opportunities to reload their portfolios at a lower access cost.</p><p>The objective of this analysis has been to uncover which companies have been more active in the oil and gas M&amp;A market in the last two years and which M&amp;A strategies had more impact on the buyers and sellers share price performance over the same period.</p><p>My screening analysis (see methodology below) among all the companies involved in the upstream M&amp;A deals announced since the beginning of 2016 has produced three rankings: 23 top buyers, 23 top sellers and 9 top mergers and takeovers.</p><p>The summary results of the report are shown in Exhibit 1. While there are significant differences between the highs and the lows, on average the buyers have performed better than the sellers although the differential between the two groups is not as high as expected. The sellers surprised on the upside as five of the top ten performers belong to this group. The companies involved in mergers or takeovers have fared slightly worse than both buyers and sellers. This result should not surprise as usually it takes longer for mergers or takeovers (if successful) to yield the benefits from the synergies and the increased scale compared to asset acquisitions. An indicative example is the share price performance of <a href="https://www.smartkarma.com/entities/22108" target="_blank" data-smartkarma-citation="entities:22108:1">Royal Dutch Shell PLC (RDSA LN)</a> since the acquisition of BG which was announced in the first quarter of 2015. The British/Dutch oil major underperformed its peers by 18% in 2015 but outperformed them by 24% and 8% respectively in 2016 and 2017.</p><p>The first and second instalments of this report <a href="https://www.smartkarma.com/insights/oil-gas-m-a-update-part-1-what-is-driving-the-continuing-growth-in-deal-volume" target="_blank" data-smartkarma-citation="insights:15626">Oil &amp; Gas M&amp;A Update (Part 1): What Is Driving the Continuing Growth in Deal Volume?</a> and <a href="https://www.smartkarma.com/insights/oil-gas-m-a-update-part-2-of-3-are-we-in-the-sweet-spot-for-industry-consolidation" target="_blank" data-smartkarma-citation="insights:16276">Oil &amp; Gas M&amp;A Update (Part 2 of 3): Are We in the Sweet Spot for Industry Consolidation?</a> were published in November and December last year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/042/485/original/exb1cor2.png?1516288410" class="editor-image img-responsive" data-smartkarma-image-id="42485"></figure><div style="text-align: left;" class="content-caption"><em>Source: Energy Market Square analysis. Prices as of 8<sup>th</sup> January 2018</em></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/042/486/original/exb2cor.png?1516288477" class="editor-image img-responsive" data-smartkarma-image-id="42486"></figure><div style="text-align: left;" class="content-caption"><em>Source: Energy Market Square analysis. Prices as of 8<sup>th</sup> January 2018. M&amp;A Indexes calculates as un-weighted median of indexed share prices in local currency.</em></div><div style="text-align: left;" class="content-caption"><em>Note: the scope of this analysis is limited to upstream M&amp;A. Downstream, midstream and oil services are not included.</em></div>

This note is a flash preview from the results of my analysis ranking the top performers in the global upstream oil and gas M&amp;A market which will be published in full in the upcoming report “Oil &amp; Gas M&amp;A Update (Part 3): Who Are the Winners in the M&amp;A Market?”.M&amp;A activity in the global oil and gas industry has grown steadily in the last two years. The global deal value rose by 23% in 2017, year on year, to $164bn, while it almost doubled in 2016 to $133bn from $69bn in 2015 if we exclude the one-off $82bn Shell/BG deal. While the oil downturn has forced some companies to refocus their regional activities and reduce their asset base, for other companies it has created opportunities to reload their portfolios at a lower access cost.The objective of this analysis has been to uncover which companies have been more active in the oil and gas M&amp;A market in the last two years and which M&amp;A strategies had more impact on the buyers and sellers share price performance over the same period.My screening analysis (see methodology below) among all the companies involved in the upstream M&amp;A deals announced since the beginning of 2016 has produced three rankings: 23 top buyers, 23 top sellers and 9 top mergers and takeovers.The summary results of the report are shown in Exhibit 1. While there are significant differences between the highs and the lows, on average the buyers have performed better than the sellers although the differential between the two groups is not as high as expected. The sellers surprised on the upside as five of the top ten performers belong to this group. The companies involved in mergers or takeovers have fared slightly worse than both buyers and sellers. This result should not surprise as usually it takes longer for mergers or takeovers (if successful) to yield the benefits from the synergies and the increased scale compared to asset acquisitions. An indicative example is the share price performance of Royal Dutch Shell PLC (RDSA LN) since the acquisition of BG which was announced in the first quarter of 2015. The British/Dutch oil major underperformed its peers by 18% in 2015 but outperformed them by 24% and 8% respectively in 2016 and 2017.The first and second instalments of this report Oil &amp; Gas M&amp;A Update (Part 1): What Is Driving the Continuing Growth in Deal Volume? and Oil &amp; Gas M&amp;A Update (Part 2 of 3): Are We in the Sweet Spot for Industry Consolidation? were published in November and December last year.Source: Energy Market Square analysis. Prices as of 8th January 2018Source: Energy Market Square analysis. Prices as of 8th January 2018. M&amp;A Indexes calculates as un-weighted median of indexed share prices in local currency.Note: the scope of this analysis is limited to upstream M&amp;A. Downstream, midstream and oil services are not included.

Flash Preview: Who Are the Winners in the Oil and Gas M&A Market? Indonesian E&P Outperforms by 415%