Oil and Gas Deals Bounce Back As Crude Oil Prices Gain Strength

Lucas Gilmore, “Big 4″ observer
April 21, 2011 /

Deals involving the oil and gas industry have regained optimism from investors as total transactions surged by 35 percent in 2010 over the same period in the previous year, owing to stronger crude oil prices.

According to Ernst & Young’s Global Oil and Gas Transactions Review 2010, crude oil prices defied expectations last year leading to renewed outlook among investors for the oil and gas industry this year.

The average value for crude oil prices climbed 27 percent last month compared to the same period last year despite increases in U.S. oil supplies. It was the first time crude oil prices reached such level since September 2008.

In NYMEX, benchmark West Texas Intermediate crude oil for May delivery was up by $1.47 to $110.30 per barrel. In London, Brent crude gained 27 cents increase to $122.20 per barrel on the ICE Futures exchange.

Ernst & Young’s review reports a US$270 billion accomplishment of oil and gas deals in 2010, 35 percent more than US$200 billion recorded in the previous year.

According to the oil and gas review, natural gas supply will outstrip the demand in the next three to five years, with prices likely to retain stability by the time.

“There is potential upside to capital spending expectations based on higher cash flows from stronger oil prices. The increased investment is likely to target the predicted growth in oil demand,” said Ernst & Young’s managing partner for EMEIA (Europe, Middle East, India and Africa) Mark Otty at an oil and gas convention in Kuwait.

In the first three quarters of 2010, oil and gas transactions were up by 50 percent compared to the same period in 2009.

There are good reasons to believe investors are ramping up capital for the oil and gas industry with the 20 percent increase in spending last year.

But the review paused to warn that offshore regulations may get in the way of shale gas productions in some areas, which will then leave its impact on plans for long-term operations.

In 2010, 947 transactions overall were announced dominated by the upstream which accounted for 73 percent of the deals. Meanwhile, volumes of deals surged 5 percent more than in 2009.

Transactions involving larger companies that are rich in cash were up by 25 percent, according to the review.


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