Unlike the record setting pace of global energy sector M&A in 2014, those expecting falling commodity prices to spur new records for deal-making in 2015 were, on the whole, disappointed. 2015 started off strong, but in the end, the year will be remembered as a year of hunkering down to wait out the storm. Commodity price volatility and valuation uncertainties for US E&P companies combined to produce strong headwinds for takeover activity, in spite of the impetus for acquisitions from historically low oil prices. While the US energy industry saw a number of high profile mega-consolidations, equity markets responded unfavorably to acquisitive E&P companies, and although the first half of 2015 saw record levels of consolidation in the midstream, even that deal flow eventually slowed to a trickle by the end of the second quarter.
Albert Goldson | Indo-Brazilian Associates LLC
For the first time since they became a world oil producing powerhouse, Saudi Arabia is facing intense and challenging pressure simultaneously from several areas that threaten not only the citizenry’s way of life, but its critical role in an increasing hostile region as well as globally.
The dynamics of world energy and the Middle East are changing rapidly and fundamentally. Although the new Saudi leadership has aggressively undertaken measures to meet those challenges, these may be too little, too late.
Holt Foster|Thompson & Knight
Just when U.S. oil prices appeared to have stabilized at $60 per barrel and industry players were acclimating to this “new normal”, recent geo-political and -economic pressures have caused prices again to plummet below $50 a barrel for the first time since early April.
Asset Sales & Hedge Monetizations – Potential Liquidity Solutions for E&P Companies and their Lenders
The swift and steep decline in oil prices in 2014 coupled with increased lending to the energy sector over the past few years has left many exploration and production (E&P) companies with insufficient cash to fund their operations and repay their debt. In turn, many of their lenders are holding loans that are either in or close to default and secured by collateral that is significantly less valuable than when these loans were made. As a result, many E&P companies are exploring ways to raise cash in the near term, not only to continue to operate, but also to appease their lenders. These companies are increasingly using asset sales and hedge monetizations in order to accomplish these goals.