Mergers and acquisitions among oil and gas producers in 2005 generated transaction values not seen since the mega-mergers of the late 1990s, according to a report issued in Houston this week.
The report -- compiled by energy research firm John S. Herold Inc. and Harrison Lovegrove & Co. Ltd., an oil and gas corporate advisory firm -- found that expenditures on corporate acquisitions more than tripled to $120 billion as corporate deal count rose 40 percent, headlined by the ConocoPhillips-Burlington Resources Inc. and Chevron Corp.-Unocal mergers.
The report covers more than 290 significant upstream transactions valued at $160 billion and reveals the continuation of a five-year trend of steadily increasing transaction values.
Reflecting the shift of exploration and production hot spots, North American transaction values increased 30 percent to $48 billion but only represented 30 percent of total global transaction value -- down from 56 percent in 2004.
Meanwhile, transactions outside of North America reached nearly $43 billion, a 54 percent increase over 2004.
The takeover of significant companies with international portfolios totaled $68 billion and accounted for more than 40 percent of all transaction value worldwide.
Deal pricing hit record highs as proved reserve values outside North America soared more than 400 percent to more than $8 per barrel of oil, while North American proved reserve values increased 55 percent to a record $14.62 per barrel of oil.
Buyers of oil and gas assets appeared to loosen their valuation criteria and their regional focus due to strong commodity prices and competitive pressures. As a result, global proved reserve costs tripled to $9.60 per barrel of oil equivalent, up from around $3 per boe in 2004.
Canada was the most expensive region, with 30 percent of deals transacted at a proved reserve value of over $30 per boe.
North American transactions were spurred by heavy activity by international players in two key plays -- the Gulf of Mexico and Canadian oil sands.
Adding significantly to market competitions has been the rise of national oil companies in global upstream merger and acquisitions activity. The transaction value of their activity in 2005 tripled, with Chinese national oil companies leading the way, followed by consolidation among Russian oil and gas companies.
Deals for unconventional resources, such as Canada's oil sands and coalbed methane, attracted heavy international attention in 2005. M&A investment in tight gas plays such as the Barnett Shale in North Texas also continued to rise.
