It was frenetic time for the Australian oil and gas sector in 2008, with deals in the industry multiplying six-fold to $US17.2 billion ($A27 billion), a new study reveals.
It was frenetic time for the Australian oil and gas sector in 2008, with deals in the industry multiplying six-fold to $US17.2 billion ($A27 billion), a new study reveals.
PricewaterhouseCoopers annual study into oil and gas deals in the country showed the value of transactions in 2008 soared from the $US2.6 billion figure recorded in 2007.
The 2008 figure was underpinned by the completion of three major gas transactions; ConocoPhillips' $US5.8 billion joint venture with Origin Energy, BG Group's $US2.9 billion acquisition of Queensland Gas and Petronas 40 per cent acquisition of Santos' Gladstone LNG project for $US2 billion.
In contrast, Asia Pacific deal activity plunged from $US10.6 billion in 2007 to $US5.6 billion.
The announcement is below:
Australia dominated oil and gas deal activity in Asia Pacific, accounting for three quarters of
regional transactions despite deteriorating global economic conditions. According to
PricewaterhouseCoopers annual study 'Oil and Gas Deals', transaction values in Australia
multiplied six-fold from US$2.6 billion in 2007 to $US17.2 billion in 2008.
Australia's strong standing was underpinned by the completion of three major gas transactions:
ConocoPhillips joint venture with Origin (US$5.8 billion); BG Group's acquisition of Queensland
Gas (US$2.9 billion); and Petronas 40 per cent acquisition of Santos' Gladstone LNG project
(US$2.0 billion). In contrast, Asia Pacific deal activity plunged, falling from US$ 10.6 billion in 2007
to US$ 5.6 billion in 2008.
PricewaterhouseCoopers Oil and Gas Leader, Nick Henry said, "Australia's high-quality gas assets
were still attractive prospects despite the impacts of the global financial crisis."
"Australia's three major deals were indicative of how confident oil and gas CEOs are about the
long-term viability of LNG. Companies are making these acquisitions now to create a future
competitive supply advantage. We can expect more gas transactions to continue as evidenced by
BG Groups recent bid for Pure Energy," he said.
Smaller players also prosper
Smaller-scale deals also experienced considerable activity, particularly among coal seam methane
companies seeking to expand and achieve economies of scale.
"Critical mass is needed to develop LNG operations, which require considerable capital
investments, operational scale and financial muscle to develop market-ready products. These
imperatives are leading to consolidation among smaller companies and buy-outs by larger entities,"
said Mr Henry.
Mid-tier deals of note in 2008 included Queensland Gas Company's friendly takeover of coal-bed
methane company Sunshine Gas for US$0.7 billion; and Arrow Energy's US$0.4 billion JV with
Royal Dutch Shell to develop Arrow's local and global coal seam gas projects.
Global deals tumble
International transaction values fell progressively during 2008 before coming to a virtual halt in Q4
2008 as global capital markets froze. Global total deal values plunged nearly two-fifths (38 per
cent) from a high of US$292.2 billion in 2007 to US$180.4 billion in 2008.
Mr Henry said, "Despite the subdued atmosphere globally, it is difficult to see cash-strong players
distancing themselves from this value-rich environment for long, particularly in Australia. Market volatility and the relative weakness of the Australian dollar are making Australian gas assets even
more attractive. Undoubtedly, M&A activity will continue in 2009."
"For developing economies such as China, the current environment offers unrivalled opportunities to
secure energy assets cheaply to fuel their domestic industrialisation. The acquisition plays we have
witnessed in the minerals sector may also play-out in the oil and gas space," he said.
