By Ed Crooks
Published: February 14 2008 01:49 | Last updated: February 14 2008 01:49
Mergers and acquisitions in the energy industry remained robust even during the financial turmoil in the second half of last year, but activity for some types of deal is likely to be weaker this year, according to a survey from PwC, the professional services firm.
Takeovers by companies from emerging markets such as China and India slowed last year and most of the biggest deals involved financial buyers or significant debt financing. Both of those factors are likely to be less evident this year because of tighter credit conditions, M&A advisers believe.
Michael Hurley, PwC’s UK head of energy, said: “It is going to be more difficult for some of the deals in downstream businesses, which are more linked to the economic cycle, to get away.”
However, if the price of oil falls sharply, a fresh wave of consolidation to match the deals at the end of the 1990s could result.
The busiest segments last year were downstream businesses – refining and petrochemicals – and oil services, PwC said. The top two deals were Basell’s $20.1bn (including debt) purchase of Lyondell Chemical, and Transocean’s friendly takeover of fellow drilling group GlobalSantaFe. Unconventional sources of energy, such as Canada’s oil sands and coal-bed methane, remained popular targets, as in 2006.
Debt finance was a feature of many of the deals. Transocean/GlobalSantaFe included a $15bn cash payout to shareholders, paid for by gearing up the merged group with the security of a $33bn order book.
One investment banker said: “They came together and paid out a massive dividend. That isn’t going to happen any more.”
Private equity has also found investing in oil services attractive, because the companies do not carry oil price risk and have strong order books. But Mr Hurley said: “I think that will be more difficult this year.”
National oil companies from countries such as China appeared to pull back last year after emerging as significant players in 2006. The Chinese companies have put more effort into acquiring acreage in licensing rounds than into takeovers.
Frank Kuijlars, head of oil and gas at ABN Amro, said: “The NOCs have been digesting their recent acquisitions and saw higher prices that they thought they should not pay. They thought it was better to wait.”
But he believes this period of relative quiet has merely been a pause. “Acquisition is a necessity for the Chinese and the Indians, and the strategic imperative is more important than the value they get when they buy.”
A steep decline in the oil price would hit corporate valuations and could create opportunities for the NOCs. If it goes far enough, it might even create the conditions for a big deal between international oil companies, such as a merger of Royal Dutch Shell and BP or a bid for BG Group of the UK.
Mr Kuijlars said: “What the IOCs do depends on what the price of oil does. If we have a really deep recession in the US, then that might have an impact on the price of oil, and that might be the moment for consolidation.”
Copyright The Financial Times Limited 2008
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Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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