More oilfield service mergers in prospect, survey finds

Offshore staff

ABERDEEN, UK – Law firm Pinsent Masons expects a surge in merger and acquisition (M&A) this year activity in the oilfield services sector.

The company interviewed 200 senior executives across the sector. Despite the continued oil price volatility, 86% expected deal activity to soar, while 70% said they were considering an acquisition within the next year.

Almost three-quarters of the respondents pointed to expansion overseas as the main driver for deal activity, with 70% expecting transactions to result from companies being forced to offload distressed assets.

Technology is another driver for consolidation, according to 60% of the respondents, with corporations operating in the offshore technology and equipment segments seen as the most attractive targets.

Singapore
, Mexico, Indonesia, China, and Nigeria appear to be the most attractive emerging markets with falling valuations and new deal structures presenting potentially profitable outbound investment opportunities.

As for mature markets, 67% of respondents felt the UK would likely offer opportunities for buyers over the next three years.

The survey found that 96% believed activity on the UK continental shelf would eventually recover to “peak” levels of profitability: 48% expect the sector to rebound within five years, while 28% are more optimistic, predicting recovery within three years subject to an improvement in the oil price.

The research also found that 83% of respondents have based their five-year investment strategy on an oil price range of $60-$80.

Global head of energy at Pinsent Masons, Bob Ruddiman, said: “The new landscape is very different from other downturns. We are in a more complex world where supply and demand and significant geopolitical events conspire with unpredictable consequences.

“Despite that, it’s encouraging to see a sense of optimism and long-termism in the sector as oilfield services companies seek to find opportunity amid the undoubted challenges.”

David McEwing, a partner in the oil and gas team at Pinsent Masons, said: “Much of the discourse around oil and gas deals has focused on the majors and how they will respond to a more volatile environment. However, it shouldn’t be forgotten that the global oilfield services sector is on course to be worth $144 billion by 2020, and is a significant employer and wealth creator.”

01/25/2016

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