Higher oil prices, plentiful financing and a strengthening global economy have been fueling a resurgence in energy sector transactions, with total M&A values more than doubling in 2017 to USD 345 billion. 

This is according to our Global Transactions Forecast, which also predicts M&A deal values will continue rising to a peak of USD 353 billion in 2018, before cooling in line with a slowing of global investment growth as borrowing costs rise in key economies and stretched stock market valuations start to soften.

"There's an expectation now that oil prices won't go below USD 50 barrel, up from lows of USD 25 to USD 30 a barrel in recent years," said James O'Brien, global chair of the Global Energy, Mining & Infrastructure Industry Group. "It may not be USD 80 or USD 100 a barrel like it's been in the past, but it's sufficient enough to drive deals."

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Energy M&A in 2018: Key drivers

North America will continue to lead M&A activity in the energy sector in 2018, although we forecast transaction values to dip slightly to USD 227.7 billion, down from USD 242.5 billion in 2017. In Europe, we forecast energy M&A to rise by more than 30% to USD 56.6 billion, followed by Asia Pacific with USD 50.4 billion, Latin America with USD 13.4 billion, and the Middle East and Africa with USD 4.5 billion.

Energy IPOs in 2018: Key drivers

Energy IPOs dropped to USD 7.3 billion in 2017 but are expected to double to USD 13.9 in 2018, driven by a rebound in oil and gas listings. As oil prices dropped, companies halted proposed stock market launches. With oil prices firming, IPOs are expect to swing back this year across a number of geographies, including North America as industry players seek to raise capital to acquire new talent and technology.

Beyond 2018

Following a peak in deal activity in 2018, we anticipate that energy M&A and IPO transactions will decline in 2019 as part of cooling of activity worldwide. After reaching a five-year high this year, we forecast energy M&A to drop to USD 312 billion in 2019 and to USD 256 billion in 2020. For IPOs, we forecast a dip to USD 12.3 billion in 2019 and another drop to USD 6.1 billion in 2020.

Looking forward, the energy sector is expected to undergo greater diversification as companies prepare for advances in technology and renewables. New technology, especially innovations like self driving and electric cars, could create major disruptions in the market.

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