Asian Financial Sector Hit Hard By Low Oil Prices
Cheap oil can often be a double edged sword. On the one hand, it has been beneficial for the emerging global economies of India and China, who seized the opportunity to expand their strategic petroleum reserves (SPR), while on the other hand, it has created an economic crisis for energy dependent nations like Russia, Venezuela and Libya.
Gone are the days when oil majors would freely invest billions of dollars in mega projects, as shrinking revenues have created significant cost pressure that needs to be reduced first and foremost. So, at a time when most of the major oil and gas players are shying away from new investments, it was expected that mergers and acquisitions would be the best alternative to increase the market value, reduce operational costs and increase service portfolio. However, much to the dismay of industry experts and market watchdogs, 2015 has been pretty lackluster for mergers and acquisitions.
Related: Do Or Die For Mexico’s Neglected Oil Sector
According to reports from PWC, the total number of M&A deals in the U.S.-oil and gas industry for the first quarter of 2015 was lower (both in terms of deal value and volume) than the last quarter of 2014. There were 39 oil and gas deals (with each deal worth more than $50 million) worth a combined total of $34.5 billion in first quarter of 2015.
Out of this, there were only four mega-deals whose values were greater than $1 billion. Shell and Statoil were some of the few global energy players who showed any real inclination towards acquiring new assets. Shell is already in process of acquiring BG group and Statoil is rumored to be targeting US-based driller EOG. Apart from a handful of big deals, the mergers and acquisition market at present looks pretty dull.
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