As a hugely important sector it is no secret that 2008 was a year of two halves in the marketplace for oil and gas related deals.
Soaring commodity prices in the first half drove significant activity, particularly in the upstream arena. The credit crisis coupled with a sharp decline in commodity prices massively reduced deal flow in the second half with many potential deals being cancelled.
2009 has brought with it a new landscape and renewed momentum. Global oil demand and prices are picking up, supported by higher consumption in China, especially in an environment where the likes of Opec have reduced production. Prices have now risen above $66 a barrel – up from a four-year low of $33 hit in mid-February.
The key factor that will drive oil & gas related deals in 2009 and beyond is buyers and sellers will start to find each other again. Players currently waiting to see how credit markets and commodity prices will play out will emerge from the shadows. Sellers will also get more aggressive – as bank credit availability remains tight for the foreseeable future, weaker companies will see the need to move a bit quicker to sell assets.
One impediment to deal flow picking up in the back half of 2008 was unwillingness on the part of sellers to respect the realities of lower commodity prices and tighter credit markets. Anchored to the very high prices their peers received pre-July, many potential sellers did not want to be the first to break rank resulting in widening price gaps. As distressed sellers come to the market in greater numbers in 2009 we expect the gap to narrow.
Recent deals that have hit the press include Baker Hughes Inc’s acquisition of Helix RDS and Hunting Plc’s acquisition of National Coupling. This is in addition to last month’s acquisitions of Anson by National Oilwell Varco (NOV) and Noble Denton by Germanischer Lloyd. Baker Hughes, Hunting and NOV are actively seeking further acquisitions and Hunting has already stated that following the NCC deal it has identified a number of further acquisition opportunities in the deepwater and subsea exploration space involving suppliers of critical equipment.
The sector landscape, with a mixture of strong and weak players, is ultimately ripe for renewed deal momentum. Acquisitions are very attractive at current valuations. Sovereign wealth funds and private equity investors will be watching the sector closely given the opportunities for acquisitions at low valuations and high future returns. Furthermore, the long-term energy supply and demand fundamentals continue to be massively compelling.
Axeon Holdings plc has been taken private by Ironshield Capital Management. Axeon is a developer and supplier of lithium-ion battery systems for the automotive industry.
JBT Corp has acquired Double D Food Engineering Ltd, a Dundee, a designer and manufacturer of custom-built ovens for bakery and protein products. The acquisition of Double D will further enhance JBT FoodTech’s solutions for the bakery market through Double D’s complementary bakery oven products and will expand JBT FoodTech’s offerings within the global protein processing segment.
Baker Hughes Inc has acquired Helix RDS Ltd, a provider of sub-surface reservoir consulting services for £15m. Baker Hughes has acquired Helix RDS from Helix Energy Solutions Group Inc and the acquisition will reinforce the group’s reservoir engineering, geophysical and production technology services to the upstream oil and gas industry.
Lockheed Martin UK Ltd has acquired IMES Strategic Support Ltd from IMES Group Ltd. IMES Strategic Support is a provider of repair and maintenance services for UK Royal Navy trident strategic weapons systems.
Van Merksteijn Group BV and Thamesteel Ltd have jointly acquired a 51% stake in Kierbeck Group Ltd, a manufacturer of steel reinforcements and rebar. Van Merksteijn is a Dutch manufacturer of steel mesh and wire whilst Thamesteel is a subsidiary of Al Tuwairqi Holding Ltd of Saudi Arabia. The acquisition is in line with Al Tuwairqi’s long-term objective of expanding its downstream and upstream steel operations in Europe.
Weststar Group Bhd has acquired LDV Ltd, the manufacturer of vans. Weststar, the Malaysian vehicle manufacturers, has acquired LDV from GAZ Group for Russia with the latter retaining the rights to the production and sale of Maxus vans in Russia and CIS countries.
Chloride Group plc has acquired Malcolm Power Systems Ltd (MPS), a provider of emergency power systems maintenance services. MPS was already a distributor of Chloride’s products and this acquisition reinforces the group’s maintenance services for AC and DC emergency lighting systems, batteries and uninterruptible power supply systems.
Polypipe has acquired the rainwater goods division of Marshall-Tufflex Group Ltd. The acquisition will strengthen Polypipe’s position in the sector adding the Universal brand and product range to the company’s portfolio of drainage products.
Capita Group plc has MMB Associates Ltd, a provider of consulting engineering services for the transportation industry. The acquisition will reinforce Capita Symonds’ position in the market for intelligent transport systems.
Hunting plc has acquired National Coupling Co Inc (NCC), a US manufacturer of subsea hydraulic equipment, for £35m. NCC specialises in high pressure and high temperature subsea hydraulic couplings for ultra deepwater applications and will reinforce Hunting’s presence in the high pressure deepwater drilling market.
Nuclear Engineering Services Ltd (NESL) has been the subject of management buy-out backed by LDC. NESL is a provider of engineering services for the nuclear power generation industry and specialises in the design, development and testing of electro-mechanical equipment used in radioactive environments.
Atlas Elektronik GmbH has acquired QinetiQ Group plc’s underwater systems business for £23.5m. The transaction is in line with QinetiQ’s strategy to dispose of certain non-core assets within its EMEA business and reallocate capital into higher growth investments.
AECOM Technology Corp has acquired Savant International Ltd, a provider of construction, cost and project management services. AECOM is a US provider of infrastructure engineering and related professional technical services and the acquisition of Savant expands the group’s global presence, particularly in Eastern Europe, Russia and CIS countries.