M&A RUSH PRE­DICTED FOR 2018

The Australian Energy Review - - FRONT PAGE - REUBEN ADAMS

GLOBAL M&A value more than dou­bled in 2017 to $US345 billion, fu­elled by higher oil prices, plen­ti­ful fi­nanc­ing and a strength­en­ing global econ­omy, ac­cord­ing to a new re­port. The Global Trans­ac­tions Fore­cast by Baker Mcken­zie also pre­dicted M&A deal val­ues would peak at $US353 billion in 2018, be­fore cool­ing in line with slow­ing of global in­vest­ment growth as bor­row­ing costs rise in key economies and stretched stock mar­ket val­u­a­tions start to soften. "There's an ex­pec­ta­tion now that oil prices won't go be­low $US50 bar­rel, up from lows of $US25 to $US30 a bar­rel in re­cent years," Global En­ergy, Min­ing & In­fras­truc­ture In­dus­try Group chair James O'brien said. "It may not be $US80 or $US100 a bar­rel like it's been in the past, but it's suf­fi­cient enough to drive deals." In Asia Pa­cific, the re­port fore­cast en­ergy M&A val­ues to rise nearly 25 per cent over the next two years, from $US43.6 billion in 2017 to $US53.2 billion in 2019. Chi­nese spend­ing, bol­stered by ap­pre­ci­a­tion of the yuan and the Govern­ment’s am­bi­tious Belt & Road ini­tia­tive, was ex­pected to be a driver. “If oil prices con­tinue to rise, it’s likely to kick-start de­vel­op­ment of the projects that have been put on hold be­cause of low oil prices,” says Martin David, co-chair of Baker Mcken­zie’s Global Power In­dus­try Group. “We will also likely see a rise in M&A ac­tiv­ity in the up­stream and mid-stream sec­tors.” EY’S global oil and gas M&A out­look was also op­ti­mistic, with up­stream deal value pre­dicted to in­crease 30 per cent year-on-year. “Risk sen­si­tiv­ity and a con­tin­ued fo­cus on in­ter­nal per­for­mance im­prove­ment may have de­layed the uptick in deal vol­ume we ex­pected in 2017,” EY Global Oil & Gas trans­ac­tions leader Andy Bro­gan said. “But the need to demon­strate ap­pro­pri­ate re­turns is now push­ing com­pa­nies to re­po­si­tion their port­fo­lios and seek economies of scale, which in turn we an­tic­i­pate will un­der­pin more M&A ac­tiv­ity in 2018.”

“If oil prices con­tinue to rise, it’s likely to kick-start de­vel­op­ment of the projects that have been put on hold be­cause of low oil prices.”

Im­age: AWE.

AWE was the sub­ject of a heated bid­ding war in Jan­uary.

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