PricewaterhouseCoopers reports that mergers and acquisitions (M&A) activity within the energy industry is expected to be weaker this year. In 2007, the total value of deals increased from $291.1 billion to $292.2 billion. Most of this increase took place in the downstream and oil services sectors. The total value of deals in the oil field services sector, which now accounts for 23% of M&A deals, rose 165% in 2007 to $67.3 billion. Basell’s purchase of Lyondell Chemical for $20.1 billion and Transocean’s $15 billion deal with GlobalSantaFe contributed heavily to the increase in the value of downstream deals. These deals were dependent on debt finance, and due to the harsher credit conditions forecasted for 2008, some analysts believe that downstream deals will be more difficult. However, for national oil companies, acquisitions are an imperative and will be tied to the price of oil.

Source: Financial Times