25 Jan 2016 | 12:01 am | 2 min. read
- In face of unprecedented oil price volatility, research reveals 70% actively considering deals - Internationalisation and tech acquisition to drive deals
A desire to capitalise on distressed situations, grow international market share and acquire new technology will drive a surge in M&A activity in the global oilfield services sector during 2016, according to major new research from international law firm Pinsent Masons.
The survey of 200 senior executives across the oilfield services industry has revealed that 86% of respondents expect a surge of deal activity in the next 12 months amid unprecedented price volatility. 70 % said they were actively considering an acquisition within the next 12 months.
74% pinpointed expansion of overseas operations as the main driving force behind deal activity, with 70% expecting opportunism around distressed assets to drive deals and 60% eyeing technology-driven consolidation. Corporates operating in the offshore technology and equipment segments were seen as the most attractive targets.
Respondents revealed that Singapore, Mexico, Indonesia, China and Nigeria are the most attractive emerging markets with falling valuations and new strategic deal structures presenting lucrative investment opportunities against the backdrop of continued oil price volatility.
In more mature markets, two thirds (67%) of respondents said the UK would be likely to yield opportunity for buyers over the next three years.
Notwithstanding that, the report reveals optimism in the industry with an overwhelming 96% predicting UKCS recovery to 'peak' levels of profitability. Almost half (48%) expect the UKCS to rebound within five years, while over a quarter 28% predict recovery within three years subject to a general improvement in oil price.
Head of energy at Pinsent Masons, Bob Ruddiman, says:
"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 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, says:
"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 $144bn by 2020, and is a significant employer and wealth creator."
"What our research shows is an industry on the cusp of transformation. Corporates are clearly looking to build out their international propositions and invest in technology which will maximise efficient recovery. It's no surprise that the UK stands out in that regard given the industry's focus on innovation and deep sea exploration – not least when we're seeing more of those types of projects in Asia. "
"That said, there's no complacency and boards are clearly focusing hard on their corporate strategies. Yes there's challenge but for some that means a chance to challenge the status quo in a dynamic market."
Learn more about the research in our Ahead of the Curve report.
Multinational law firm Pinsent Masons has been recognised as a leading lesbian, gay, bi and trans employer by LGBT charity Stonewall in its Top Global Employers Index 2020 for the fifth consecutive year.
Multinational law firm Pinsent Masons has advised Schütz Family Office on the acquisition of private bank Freie Internationale Sparkasse S.A..
Multinational law firm Pinsent Masons has been named as one of the top ten family friendly employers in the UK by work life balance charity, Working Families.
Multinational law firm Pinsent Masons has appointed energy partner Paul Rice to lead its newly created Climate Change Mitigation and Sustainability group as it seeks to embed a coordinated, firmwide approach to the climate crisis.
Multinational law firm Pinsent Masons has advised Sanjeev Gupta’s GFG Alliance on the de-merger of SIMEC ZEN Energy Group, GFG’s renewable energy development and retail businesses in Australia.
Multinational law firm Pinsent Masons has appointed Transactional Services partners Nicholas Hanna and Mark Tan, as it grows its corporate capabilities in Singapore.
For all media enquiries, including arranging an interview with one of our spokespeople, please contact the press office on