October 7, 2015
Market disruption often causes an increase in merger, divestiture, and acquisition (“MDA”) activity. The Energy Complex is no exception, and the steep decline in commodity prices during the last twelve months means increased deal activity. More is expected. This paper examines the buyers, the sellers, and the critical valuation issues involved. It also sketches out a path ahead for MDA activity in this industry.
In The Headlines
Given the current market situation, energy projects in Mexico and Latin America are facing some constraints. However, in the case of Mexico, the power sector and the midstream sector are generating more opportunities and are being conceived as more vibrant sectors in the economy than large upstream projects.
Topic of Discussion
The low oil price environment has hampered upstream oil and gas merger and acquisition activity so far in 2015, while the number of deals in the midstream segment has been increasing. According to Price Waterhouse Cooper’s “Second-quarter 2015 oil and gas industry mergers and acquisition analysis,” there were 21 midstream oil and gas deals with values greater than $50 million in the last quarter, more than doubling the number of midstream deals in the second quarter of 2014. There were only 18 M&A deals in the upstream sector, which is nearly half of the volume for upstream deals in the second quarter of 2014.