U.S. Oil and Gas Market - Mergers and Acquisitions Climb to Record High

Recording a total of 130 mergers and acquisitions in 2014, M&A activities in the U.S. oil and gas production sector have reached an all-time high. Transaction volumes amounted to more than EUR 52 billion, the highest value seen in the past ten years. Higher transaction volumes were only recorded in 2005 (EUR 72 billion). These are the findings of calculations by the Centre for European Economic Research (ZEW) based on the Zephyr database of Bureau van Dijk (BvD).

Compared with 107 transactions worth EUR 35 billion in 2013, the current values represent an increase by 80 or a 49 per cent growth. There are two main reasons for rising M&A activities in the U.S. oil and gas sector.

The first is that crude oil prices on the world market have fallen rapidly since autumn 2014. In January 2015, the price for one barrel of Brent crude temporarily dropped below USD 50. These low trading prices boosted mergers and acquisitions in the last quarter of 2014. In the U.S., cheap crude oil caused corporate values to fall and increased the attractiveness of small-sized enterprises as potential takeover candidates.

The second reason for the rise in M&A activities is the ongoing consolidation of the sector for shale gas extraction. The fracking business has surged lately, particularly in the U.S. The young market is currently adjusting itself. That means, many companies are acquired by or merge with another firm. This phase of consolidation thus contributed to the recent increase in M&A activities in the U.S. oil and gas industry as well.

Forecasts predict that the number of mergers and acquisitions will continue to rise in 2015 if the oil price remains at such a low level. Further consolidations are expected in the young industry of shale gas extraction, which underpin this prediction.

For more information please contact

Niklas Dürr, Phone +49/621/1235-386, E-mail duerr@zew.de