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According to a report from PLS Inc and Derrick Petroleum Services, global mergers and acquisition activity in the energy sector in 2013 has been one of the lowest since 2007, with exception of the 2009 aftermath of fi..

22 Jul 2013

NEW YORK (Commodity Online): Energy players are maintaining a cautious stance while expanding operations or joining with other players.

According to a report from PLS Inc and Derrick Petroleum Services, global mergers and acquisition activity in the energy sector in 2013 has been one of the lowest since 2007, with exception of the 2009 aftermath of financial crisis.

All put together, in 2013 so far, total deal value was reported at $45.8 billion, which is much below last year.

The report noted that global M&A for this quarter was $24.9 billion, with 141 deals, down 12% from the same period last year, but up 19% from Q1 this year. For Q2 2012, we say 173 deals worth $28.4 billion. For Q1 2013, we saw 117 deals worth $20.9 billion. But nothing so far compares to Q4 2012, which saw 223 deals totaling a whopping $138 billion.

Analysts maintained that weakness in M&A activity was mainly attributed to the uncertain economic scenario in the western market and limitations on cash flows generation from energy business.

Buyers are taking a conservative stance, PLS says, coming off a high of intensive investment in new plays. Companies went on an acreage-buying binge, and now they’re focusing on developing that, a report by Oilprice.com noted.

However, as has been seen in the previous quarters, the M&A activity is on the rise as compared with the period in 2009.

According to PLS, in comparison to 2009, M&A activity is on the upswing, “equity markets have been rising nicely, oil and gas prices are relatively stable and there is plenty of deal inventory.”

Meanwhile, domestic oil production is rising. New research from former oil industry executive Leonardo Maugeri of the Harvard Kennedy School claims that domestic shale oil production could rise to 5 million barrels per day by2017, while the Energy Information Administration (EIA) estimates 10 million barrels per day between 2020 and 2040.

Maugeri predicts that the US will have 100,000 producing wells in North Dakota and Texas by 2030 (90,000 more than we have now).

In terms of US oil production, the question (every summer) is why US consumers don’t seem to be benefitting from higher oil production at the gas pump.

The increasing domestic oil production will usher in gas prices that are below $3.00 a gallon. This, the experts agreed, is likely a thing of the past.


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