Merger Activity in Oil Sector Down 72% in 2008

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 |  Includes: DVNLF, ITXFF, NUVSF, OXY, RDS.A
by: FP Trading Desk

Oil industry mergers in the first half of this year were down significantly – to C$6.6-billion from C$23.8-billion in the first half of 2007 – according to a survey by Sayer Energy Advisors. That’s a 72% drop, ending a succession of rising numbers over the last five years.

Sayer also said in a note to clients that the number of large transactions (over C$5-million) fell to 70 from 110, and there were no deals at all topping C$1-billion, compared to four deals worth a total of C$15.9-billion in the same period of last year.

The largest deal in the first half of 2008 was Iteration Energy Ltd.’s (OTC:ITXFF) acquisition of Cyries Energy Inc. for C$655-million. The second-largest deal was NuVista Energy Ltd.’s (OTC:NUVSF) purchase of Rider Resources Ltd. For C$589-million, while the third largest deal was the acquisition of Enerplus Resources Fund’s 15% working interest in the Joslyn oil sands project by U.S.-based Occidental Petroleum Corp. for C$500-million.

Among the reasons for the downturn, according to Sayer, is

there was not a lot of product publicly known to be in the market during the first quarter of 2008. What was available mainly involved smaller packages and a few larger heavy oil offerings, as well, many of the deals that took place were corporate transactions done on a quiet basis without a public marketing process.

However, while 2008 might have got off to a slow start, Sayer suggests merger activity should pick up in the second half.

The note says:

It is coming around, with the value recorded in the first couple of months of the third quarter surpassing the total for the first half of 2008.

To date, total M&A activity has reached C$6.7-billion, highlighted by Royal Dutch Shell plc’s (NYSE:RDS.A) announcement to buy Duvarnay Oil Corp. (OTC:DVNLF) for C$5.9-billion.

With a lot of time left before the year end, it is possible that in spite of the slow start, 2008 could prove to be another active year on the M&A front.