BAKU, Azerbaijan, Sept.22
By Leman Zeynalova – Trend:
The COVID-19 pandemic that has emerged as a new theme adversely impacting the oil and gas sector, is likely to impact oil and gas deals’ activities in the short-term, Trend reports citing GlobalData.
“Low prices coupled with a prospect of low demand will not augur well for the sector and force to rethink on project timelines and cost-cutting across value chain. Buyers are wary of mergers and acquisitions (M&A) deals while conserving cash for the future and possible target companies may also be reluctant to sell off at depressed prices.
“In Q1 2020, a total of 14 M&A deals with a transaction value of $50 million or more were announced in the global oil and gas space. These deals had a combined transaction value of $4.2 billion, which was down by 80 percent when compared to Q4 2019 and 95 percent down when compared to Q1 2019.
“Mergers and acquisitions (M&A) activity across the oil and gas sector reached $224.4 billion in deal value in 2019, reflecting growths of 29 percent and 159 percent compared to 2018 and 2017, respectively. The main themes that drove this activity were shale, emerging economies, China impact and subsea, according to GlobalData, a leading data and analytics company.
“Deal activity was also influenced by the need to make strategic partnerships to overcome the regulatory challenges, gain access to IoT, cloud or other emerging technologies and diversify into renewable energy. The growing importance of sustainability, combined with volatile oil prices and diminishing resources resulted in M&A for diversification.
“The equipment and services industry witnessed most of the technology-driven deals in the sector. Tightening profit margins and resources that are increasingly difficult to reach have, in part, made investments into technologies a necessity.”
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