Weak and volatile prices dulled M&A activity in 2016, with a few exceptions
It has been a tough old run for anyone trying to get deals done in the world's oil and gas sector. Just ask Halliburton. Its $28bn takeover of Baker Hughes collapsed, leaving it to watch as, a few months later, its target fell into a proposed merger with GE.
In 2015, global upstream deal value plunged, according to 1Derrick and PwC, which compile such data. The total number of deals wasn't down by much - just 31, to 1,537. But values were. Transactions amounted to just $150.86bn, a drop of almost a quarter from a year earlier.
Pushing mergers across the line was a problem everywhere. Several large, unsolicited corporate takeover bids were rejected and asset deal value fell to a 10-year low, according to IHS Markit, a consultancy. Low and volatile oil prices were to blame: they left buyers and sellers unable to agree on asset values, creating a gaping divide between bids and offers.
Company policies to slash capital spending also took their toll on valuations - even if, in theory at least, buyers should have enjoyed a rich pick of cheap assets. Shell, for example, announced plans to divest assets worth $30bn by 2018, while BP pledged disposals of around $5bn. Total and Eni are also selling chunks.
Still, few in the industry had a consensus about where oil prices - and thus asset values were headed.
That demotivated buyers. As for sellers, none of them like to slough off assets they bought or built expensively during the high-oil-price era.
Things hardly picked up in 2016 either, especially in the exploration and production segment. In the 12 months to August, total global upstream deal value was $87.224bn, calculated PwC. That was a 55% drop on the $192.473bn worth of deals done in the 12 months to August 2015
It might not be the fairest comparison. The big deal which skewed 2015's figures, particularly for the North Sea, was Shell's $50bn acquisition of BG Group. This year there hasn't been a deal of that magnitude.
At least the activity levels haven't shrunk as much as values. In the 12 months to August 2016, companies pulled off 1,396 upstream M&A transactions, just two fewer than in the 12 months to August 2015, says PwC. Supporting the number was an increase in smaller farm-ins.
North America was the brightest spot, notwithstanding the collapse of the Halliburton-Baker Hughes deal. GE's $32bn merger with Baker Hughes, announced in late October, was one highlight. In the midstream, Enbridge's September capture of Spectra Energy, in a $28bn transaction that gives the Canadian firm a commanding infrastructure presence across the continent, was another eye-catcher.
In the 12 months to August 2016, 817 deals were done in North America at a total value of $57.95bn, according to PwC.
That's up from 789 deals completed a year earlier, though the deal value then was higher, at $74.87bn. The Gulf of Mexico saw some activity, and so did the Permian, accounting for around $10bn worth of transactions.
The most bullish move was probably Suncor's $3.2bn takeover of Canadian Oil Sands in February. Oil prices were near their 2016 nadir then, so the deal might be considered well-timed. Elsewhere in the oil sands, heavy debts made even the juiciest assets look difficult to digest.
Asian oil and gas deal-making was running at about half its year-earlier level by August, reckoned PwC. The stand-out transaction was ExxonMobil's $2.5bn purchase in July of explorer InterOil Corporation, giving the US major a bigger reserve base in Papua New Guinea.
Indian buyers were keen on Russia, though. ONGC bought 15% of Rosneft's subsidiary Vankorneft for $1.3bn early in the year and, in September, signed an agreement to buy another 11% stake later. As for Rosneft itself, it paid $5.3bn for a controlling stake in Bashneft. The Russian state controls both companies, so what was announced as a privatisation of Bashneft - for the purposes of raising money for the exchequer - ended up as a reshuffling of state assets.
The biggest transactional news of 2016 came out of Saudi Arabia. In January, the kingdom announced its plan to privatise part of Aramco.
Details were scant, except that just 5% of the firm would be listed and the IPO would, Aramco officials assured the world, include disclosure of long-secret information such as reserves.
It was enough to whet the appetites of bankers from Riyadh to Wall Street. If 2016 wasn't much fun for middle-men, the Aramco IPO, set for 2018, gave some of them a reason to hold onto the yacht.
This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here