EXPERT SEES PICK-UP IN OIL AND GAS M&A ACTIVITY

       The number of mergers and acquisitions in the globฌal oil and gas industry slumped to 393 in the first eight months of the year from 697 in the first nine months of 2008, in the aftermath of the worldwide financial meltdown.
       However, the value of M&As only fell from US$99.11 billion (Bt3.3 trillion) to $82.98 billion in the same periods, Andy Brogan, an oil and gas specialist at Ernst & Young, said in an exclusive interview with The Nation.
       The upstream oil and gas industry was still the most active sector for the eightmonth period, with 355 deals worth $75.38 billion. Downstream deals totalled 38, with a value of $7.6 billion.
       In the first nine months of last year, 621 deals worth $89.77 billion were in the upstream sector and 76 deals worth Bt9.33 billion were downstream.
       Even though the number and value of M&A deals for the first eight months of this year were lower than the first nine months of last year, the average deal size was greater.
       The average size for the upstream and downstream sectors over the first eight months amounted to $212 million and $200 million, respectively, compared with $145 million and $123 million for the first nine months last year.
       "After the financial crisis erupted last year, we saw a drop in the volume of transactions … due to a number of reasons. In the second quarter [this year], we could see a pickup in volume. We expected it [M&A] would become more and more active in the last three to four months of this year," Brogan said.
       He explained that the global financial turmoil and pricing of assets were among several reasons behind the steep decline in M&A volume this year.
       Buyers in the first eight months of this year were diverse, including sovereign funds, national oil comฌpanies and a few international oil companies, he said, adding that the global crisis presented an investment opportunity for wellcapitalised companies.
       National oil companies have become more active in the M&A market as targets are more affordable, he added.
       Asian national oil companies have jumped on the bandwagon to take advantage of the opportunities, and their recent deals include Sinopec's acquistion of Addex for $7.2 billion, CNPC's acquisitions of MMG for $3.3 billion and Keppel's 45percent stake in the Singapore Petroleum Company for $1.1 billion.
       Brogan is optimistic there will be an upturn in numฌber and value of M&A deals in the near future, given the continuous pace of the worldwide economic turnฌaround and the global oilprice rebound.
       He expects the oil price to hit a new high in the next five years, while referring to a consensus that it would be $60 a barrel - give or take $10 - over the next six months.
       The stronger demand from emerging markets will compensate somewhat for the decline in demand in Organisation for Economic Cooperation and Development countries, he said.
       He acknowledged that not all M&A ended up as sucฌcessful, but the upstream sector regularly achieved more of its M&A aims than downstream, as the forฌmer had a clearer target of what it wanted to gain from a merger or acquisition.
       "Understanding what you buy and making sure that the price you pay reflects the understanding are the key to success for M&As," he added.
       Australia, Indonesia and the Middle East are geoฌlogically favourable areas for investment by Thailand's oil and gas companies, said Vorapoj Amnauypanit, an Ernst & Young (Thailand) partner.
       In the past nine months, the Kingdom's inbound oil and gas M&A deals have not been very active, while outbound deals have increased gradually, he said.