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M&A activity rises with prices

Firmer oil prices are fuelling an upswing in merger activity, but what are the new legal trends energy firms need to be aware of?

By Jean Forrest, partner, Cassius LLP

While some headwinds remain, oil and gas market fundamentals now appear more stable.

Oil prices are well above the 2016 nadir, and both drilling and production continue to rise-upstream companies should consider further optimizing and consolidating their asset portfolios for a potential recovery. Oilfield services (OFS) companies will likely need to continue to expand completions offerings as the US-drilled but uncompleted well count continues to increase.

US exports of oil, refined products, and natural gas are expected to grow-potentially shifting the domestic and international energy trade balance-and may provide opportunities for well-positioned midstream and downstream players.

2019 holds promise for increased deal flow year-over-year as the industry continues to adapt to an evolving energy landscape, but pitfalls remain. To be ready, it is important to take stock and gain a better understanding of 2017 oil and gas M&A activity.

As global crude stocks decline and industry investment rises, returning confidence could translate into a return to increased deal flow in 2018 and beyond. The upstream sector continues to lead, but as production continues to grow, it could unlock interest in the OFS, midstream, and downstream sectors as well.

Mergers and acquisitions can eliminate the competition, allow companies to reach new markets and gain new customers.

There are a multitude of benefits to enjoy from combining business interests and looking at a collaborative way forward. However, these can only be achieved through a well-strategised, effective and focussed plan.

So, here are the top tips for successfully approaching mergers and acquisitions. Ensure you have shared goals The first step is to ascertain that both companies have shared business goals and objectives.

Is there anything you disagree on?

Do you undertake different practices in relation to similar areas that could cause friction? These are questions that directors should pose from the initial discussions to identify whether the merger is in the best interests of both companies.

Once you have ascertained an understanding with the company you are merging with or acquiring, it's time to enlist the services of a business advisory specialist. An expert can assist companies on effectively restructuring the business, the legal implications, tax considerations following a transaction, and also any future business forecasts which could occur as a result of the new company structure.

 

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