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Energy, mining and utilities deal value climbed by 34 percent to US$350.1 billion over 2018, despite deal volume falling 8 percent year-on-year to 440 transactions.
Percentage increase in deal value compared to 2017
The oil & gas industry, which benefited from an oil price that,for most of the year, had stabilized at approximately US$60 per barrel, was the primary driver of the increase in deal value. Oil majors with good cash balance sheets felt more comfortable taking a view on the targets that would deliver long-term growth, many shifting towards long-term shale-producing assets, and away from assets like those in the Gulf of Mexico.
Refiner Marathon Petroleum Corporation, for example, acquired rival Andeavor for US$31.3 billion, while BP placed a bet on the long-term viability of shale with the US$10.5 billion purchase of Petrohawk, a portfolio of US shale assets, from BHP Billiton. Transactions unwinding master limited partnership structures, such as Energy Transfer Equity buying a 97 percent stake in Energy Transfer Partners for US$59.6 billion, also lifted headline figures.
Companies returning cash to investors attracted increased investment over 2018, allowing them to raise the capital to execute deals.
Further volatility ahead
A sharp fall in the price of oil towards the end of 2018, when the price per barrel dipped below US$50, however, could put a brake on the steady M&A activity observed in the sector in 2018.
With investors expecting as much as IRRs of 20 percent over three years, renewed volatility in oil prices may slow transaction activity.
Top oil and gas deals
1: Energy Transfer Equity acquires Energy Transfer Partners (97.64 percent Stake) for US$59.6 billion
2: Marathon Petroleum Corporation acquires Andeavor for US$31.3 billion
3: Dominion Energy acquires SCANA for US$14.3 billion
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