Energy Shareholders Benefit from Consolidation
A new study from consultants Wood Mackenzie finds consolidation in the energy industry tends to boost shareholder value rather than diminish it.
The report analyzed the strategy used and value created in deals completed by 38 companies between 2001 and 2006. The companies included major oil companies, independents, Asian national companies and Russian players.
The 195 transactions examined created a total of $204 billion in shareholder value with another $34 billion generated from discovered resources.
Some 84 billion barrels of oil equivalent were acquired in the deals.
The report also points out that significant returns do not happen overnight. “In the current environment of increasing prices and increasing costs, it has taken on average three years for deals to achieve returns in excess of 15 percent, with returns generally increasing the longer the asset is held, such deals benefiting from the rise in commodity prices.”
The study goes on to say that Russian deals generated the highest average returns, although international participants were excluded from a number of those transactions. Better returns came from near-term production than from longer-term exploration projects, and asset deals did better than corporate deals.
