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Global Upstream Deals Fell by $4.3 Billion in June

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The global upstream oil and gas sector saw a decrease in deal activity in the last month. According to research and consulting firm GlobalData, deals including capital markets and mergers and acquisitions (M&A) totaled $19.3 billion from 125 transactions in June, marking a $4.3 billion decrease in value from the $23.6 billion across 119 deals posted in May.

According to the company’s latest monthly upstream deals review, upstream M&A accounted for $8.8 billion from 18 transaction announcements in June. While this was a significant drop from $11.7 billion in May, the number of M&A transaction announcements increased from 13 in the previous month.

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“Capital raising continues at the healthy clip seen in 2015, driven by debt offerings in the [United States] almost a year from prices collapsing,” said Matthew Jurecky, GlobalData’s head of oil and gas research and consulting. “Companies continue to seek financial flexibility and restructure short- and reserves-based capital to avoid bankruptcy.”

GlobalData’s report shows that Europe, the Middle East and Africa (EMEA) led the global acquisitions market in terms of value in June, with a 39 percent regional share totaling $4 billion. This came from 18 deals, of which 14 with a combined value of $4 billion were announced, and four with an undisclosed value were completed. The majority of M&A activity in EMEA was centered on offshore assets, which delivered the greatest share of deal volume with 10 deals in June.

“M&A momentum continued in June with Emirates National Oil Co. proposing a buy-out of Dragon Oil, BP buying a stake in one of Rosneft’s Siberian fields and Wintershall selling a package of North Sea assets to Tellus Petroleum,” Jurecky said.

Other significant transaction announcements include a proposed $2.3 billion merger between Vedanta and Cairn India, as well as an acquisition of royalties from Cenovus for $2.67 billion by the Ontario Teachers’ Pension Plan.

“Market conditions will continue to fuel a desire for M&A,” Jurecky concluded. “After a failed attempt years ago, Emirates National Oil Co. is another case of a company taking advantage of depressed asset values to consolidate ownership in one of its positions, Dragon Oil. 

“On the other hand, Wintershall is disposing of lower growth assets, which for Tellus is an opening into a stable and dependable production base.”

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