Since April 2015, when BG and Shell reached a £47 billion takeover deal, the outside world began to speculate whether this would be a similar round of consolidation like the “seven oil sisters†period. So, after entering May, the oil and gas giants were merged. Investors are hotter than ever - news like "Exxon may buy BP with a 60% drop in profit in the first quarter" and "Chevron's stare at a downsized Total" and other news, appearing on the headlines from time to time. .
Shell
Although for various reasons, there is no time for an acquisition to take shape, whether it is the low oil price cycle or the lack of reserve growth of large oil companies, it indicates that a new wave of oil and gas mergers and acquisitions is gaining momentum. In fact, waiting for the acquisition and reorganization of the giants may be like the scene shown by the absurd drama "Waiting for Godot", which needs the right time and the right target. Therefore, if Godot comes, it is no accident, and low oil prices are the best time for the company to plan its final choice.
Shell Mignon BG Benefits
If we review the major mergers and acquisitions that have occurred in the history of the oil industry, the formation of a wave of oil mergers and acquisitions is due, on the one hand, to the cyclical factors of the oil price and, on the other, to technical progress.
In the 1980s and early 1990s, affected by two oil crises, international oil companies set off a massive wave of mergers and acquisitions. A large number of independent oil companies became strong during this period, such as France’s Total and Italy’s Eni.
Ten years later from 2000 to 2006, the major upstream oil companies once again adopted mergers and acquisitions to gradually transform into large-scale international oil companies and form the current pattern of the world oil market. After 2006, due to the advancement of shale oil and gas exploration technology in North America, through mergers and acquisitions of independent oil companies that have long focused on upstream exploration, large oil companies with high operating costs have successfully entered the shale oil and gas industry in North America.
For mature large-scale international oil companies, the primary factor that companies consider whether to initiate mergers and acquisitions is synergies. From this point of view, Shell's alliance with BG can achieve the greatest degree of operational synergy.
As far as Shell itself is concerned, even if it suffered from the impact of low oil prices in 2014, it still managed to maintain its operating income second only to Exxon Mobil's ultra-high levels. Its upstream and downstream business integration also enhanced Shell's risk of resisting low oil prices. Capability, although this sector once lowered the company's profit growth level before the high oil price period before 2014.
From the perspective of the merged company BG, although its scale is only one-fifth of Shell's, the company has a dominant, long-term, stable portfolio of assets. Since 2005, BG has maintained ultra-high-speed production growth, with billions of dollars in projects in Brazil, East Africa, Australia, Kazakhstan, and Egypt. The characteristics of the concentration of its dominant assets and the rapid growth of output once made it difficult for international major oil companies.
From the perspective of existing business scale and corporate development strategy, it is expected that by 2020, Shell's acquired BG is expected to become the global leader in LNG, achieving 45 million tons/year of LNG sales, equivalent to half the size of Qatar, and It is likely to become the third largest natural gas producer after the giant state-owned oil and gas company, Gazprom and Iranian National Oil Company.
It's hard to make a big difference.
However, after Shell's trick, the possibility of recurring similar super-large mergers in the short term is still relatively small.
According to Wood Mackenzie's follow-up survey of more than 30 major independent energy companies, among the six major international oil companies, Shell, Exxon Mobil, and BP's upstream operations have the strongest ability to withstand low oil prices, making it possible to launch mergers and acquisitions. It is also the largest, and Chevron, ConocoPhillips and Total need to maintain their existing exploration and development levels and financing scale in 2014 and will be under greater pressure. Therefore, from the perspective of a potential master-company, the number of large multinational oil companies that have the strength to initiate mergers and acquisitions is limited.
As potential acquirers, such as the Norwegian national oil company, Total, Petrobras and Eni, mature and integrated medium and large-sized international oil companies, the international oil giants have successfully collected their products due to the protection of government finances. It is still relatively difficult for Yuxia. Taken together, the company most likely to initiate a merger or acquisition is a BP company. However, the assets of the company in Russia and the debts borne by the Gulf of Mexico incident have caused BP to undergo long-term mergers and acquisitions as well as mergers and acquisitions. Well-thought-out planning.
Although super-large-scale mergers and acquisitions are hard to come by, it is likely that there will be a wave of mergers, acquisitions, reorganizations, and consolidation at the level of a large number of independent oil and gas companies. It is also possible to create a large independent oil and gas company.
The main battlefield for this round of international oil and gas mergers and acquisitions should be North America. Because of the impact of low oil prices, high-cost unconventional oil and gas exploration and development will face operational difficulties. At the same time, LNG projects with relatively high construction costs are also expected to face delays or even be sold. In the medium to long term, the global natural gas demand market still has great potential, and unconventional oil and gas and LNG industries still have broad prospects. Therefore, mergers and acquisitions around unconventional oil and gas projects and LNG projects will become the focus of this wave of mergers and acquisitions.
In the first half of 2014, North American oil and gas M&A transactions totaled close to US$49.4 billion, which is higher than the sum of M&A sums in Africa, Asia-Pacific, Europe, Russia, Central Asia, Latin America and West Asia and North Africa - US$44.3 billion. The impact of low oil prices on unconventional oil and gas production. According to Wood Mackenzie's follow-up survey of major independent energy companies, when oil prices fall by more than $80/barrel, 4/5 of the companies will not be able to maintain their 2014 exploration, dividend, and repurchase capacity; and when oil prices fall below 60, In US$/barrel, two-thirds of independent oil and gas companies will not be able to maintain their development level and financing capacity in 2014. Among these companies are independent oil companies with mature operations, management, and technology like Apache, Hess, Marathon, and Anadarko, and independent natural gas in the field of shale gas such as Newfield, Chesapeake, Continental, Talisman, Encana, and Devon. the company.
Moreover, starting from the third quarter of 2014, 17 oil and gas companies such as Hess, Marathon, Encana, Apahce, Chesapeake, and Devon have gradually started the divestiture program in addition to BG. These independent energy companies specializing in oil exploration and development have lower operating costs in special operations than international large oil companies, whether as acquisition targets for large multinational oil companies or mergers and mergers and establishment of super-large independent oil and gas companies. It is very likely.
State-owned Enterprises Understated
It is worth noting that M&A is essentially an art of capital operation. Mergers and acquisitions are conducive to the merger and acquisition companies to ease the cash flow pressure, but also conducive to the expansion of the scale of the main business and optimize the business structure, but to solve the current fundamental problems facing the oil industry - high cost and low technology, essentially rely on technology Innovation and management innovation.
Especially at the moment, re-shuffling is an indisputable fact. For China's energy companies, rational mergers and acquisitions focusing on quality and efficiency should be the right way for China National Petroleum Corporation to invest overseas.
At present, domestic oil companies have many problems in their own right. On the one hand, due to the impact of international oil prices, profits of oil companies with upstream exploration and development as their main business operations will be significantly reduced. To meet the reduction in capital expenditures at low oil prices, CNPC and CNOOC have concentrated their exploration operations into mature and rolling areas to reduce investment in new areas and high-risk projects to ensure sustainable development; on the other hand, The large-scale expansion of the year has also made the major oil companies’ financial situation tend to be tight.
From 2009 to 2013, the total amount of overseas mergers and acquisitions of China's “three barrels of oil†exceeded US$100 billion. However, by 2014, China’s three major oil companies’ overseas M&A expenditures have dropped significantly. Against the backdrop of domestic anti-corruption and energy revolutions, major oil companies have successively adopted countermeasures to reduce administrative expenses and strictly control capital expenditures, and have increased their quality and efficiency. Therefore, in this wave of international oil and gas mergers and acquisitions, China's state-owned oil companies are expected to remain relatively low-key.
For private companies in China, it is a good time for companies to expand their scale and acquire overseas upstream oil and gas assets. Contrary to the low profile of the three major state-owned oil companies, since 2013, the pace of overseas oil and gas investment by Chinese private enterprises has accelerated significantly. In 2014, a total of 9 privately-owned companies had mergers and acquisitions amounting to 2.2 billion U.S. dollars, and investment targets were mainly concentrated in the political and economic environment. A stable area.
Of course, overseas mergers and acquisitions require a higher level of international experience for companies. At the same time, in view of the current target assets available for investment, most of them are unconventional projects that require deep human, financial, and technical capabilities, such as shale oil, oil sands, and heavy oil. And LNG projects. Private enterprises have smaller volumes and their ability to judge the quality of assets is not yet mature. Therefore, private companies must take a more cautious approach and make more comprehensive considerations in order to grasp this round of merger and acquisition opportunities. First of all, private enterprises must clearly define the purpose of cross-border mergers and acquisitions, conduct in-depth and detailed analysis of mergers and acquisitions target companies, confirm whether the acquisition of target companies can enhance the competitiveness of enterprises and promote the long-term development of the company; systematic and thorough planning of mergers and acquisitions activities, Prepare and propose solutions to the possible accidents; select practical mergers and acquisitions and mergers and acquisitions programs to enable companies to avoid M&A risks and economic losses to achieve M&A goals.
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