SE Asia Upstream M&A May Hit $14bn: WoodMac
Southeast Asia could take centre stage in the region's upstream M&A activity in 2019, with up to $14bn worth of assets potentially switching hands, according to a report published April 25 by Wood Mackenzie.
Upstream M&A deals worth $2.8bn have already been announced during the three months to March (1Q 2019), WoodMac said. This includes Murphy Oil's $2.1 divestment of its Malaysia business to Thailand's national oil company (NOC) PTTEP. With the exit, Murphy Oil will focus on its core positions in US Gulf of Mexico, North American onshore and Latin America.
"We have observed for a while now the trend of oil majors exiting countries in the region as their portfolios mature and contracts expire. Drawn to more commercially compelling opportunities elsewhere, southeast Asia is also becoming a non-core region for large- and mid-cap international oil companies (IOCs)," said Wood Mackenzie research director Andrew Harwood.
Asia-Pacific upstream deal spends hit $8.7bn last year, accounting for over a third of global spend (excluding North America). According to WoodMac, this increase in activity was primarily driven by a reshuffling of portfolios in Australia and New Zealand. However, southeast Asia is set to feature more prominently in 2019, with more than 5.4bn barrels of oil equivalent (boe) of predominantly gas assets potentially coming to market, it said.
Alongside retrenchment by traditional E&P players, 2019 M&A potential will also be driven by regional NOCs farming down assets to bring in technical and financial partners to manage newly-expanded portfolios, WoodMac said, adding Pertamina and PTTEP, must spend a collective $32bn over the next five years to maintain their domestic supply outlook.
"Pre-development projects that been stalled during the oil price downturn is also another theme for smaller players and new entrants to take note of. As economic conditions improve, there could be new owners and new capital looking to monetise these assets," added Harwood.
According to WoodMac, potential buyers may include NOCs, Middle Eastern operators and regional specialists.
"The M&A bear view would be that there is a smaller universe of potential buyers, but we think regional NOCs, Middle Eastern operators and regional specialists, continue to be active players shoring up assets in southeast Asia.
"Recent global corporate activity will have a knock-on effect on southeast Asia portfolios. And changes in the regional investment climate following recent elections, fiscal adjustments and exploration success could spur new activity. The dominoes in southeast Asia's M&A space have already started to fall,” Harwood said.