Nov 19 | 2020
(Asia) Transactions at Lowest This Century
Asia-Pacific upstream transactions have plunged to the lowest rate this century, according to research consultancy Wood Mackenzie.
The firm reports that US$426 million of assets had changed hands as of mid-November, a drop of more than 90 percent compared to the US$5.1 billion transacted in 2019.
“Never before has the upstream industry been challenged to this extent. The combination of the oil price crash, Covid-19 and rising pressure to comply with ESG (environmental, social and corporate governement) standards have created the perfect storm in the upstream industry,” said Alay Patel, principal analyst at Wood Mackenzie.
The decline is likely to have significant impacts for the breakbulk industry, as lack of transactions this year will result in forward demand lagging, even as deal values are forecast to rise in 2021.
“We can expect deal activity to bounce back over the next 12 months as buyer-seller price expectations converge, and the recent uptick in global M&A (mergers and acquisitions) driven by consolidation of North American players spills over to divestment of non-core Asia-Pacific assets.”
About US$12 billion of upstream assets is expected to be for sale and farm downs across Asia-Pacific, but analysts remain unclear on who will acquire the many assets coming to market.
US$26 Billion of Assets
Majors and large cap international oil companies are the primary sellers of assets with LNG opportunities accounting for almost 60 percent of the 5.8 billion barrels of oil equivalent of resources on offer.
“If we look further ahead towards potential farm downs or future candidates for divestment, we assess a further US$26 billion of assets could come to the market as corporate strategies evolve,” said Andrew Harwood, Research director at Wood Mackenzie, said.
Headquartered in Edinburgh, Scotland, Wood Mackenzie is a subsidiary of Verisk Analytics, a global data analytics and risk assessment group.
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