O&G Mergers and Acquisitions on the rise in Brazil

According to data from KPMG consulting there were 22 merger and acquisition operations in the market during the first 6 months of 2013, 4 times higher than in the first semester of 2012. This is mostly due to the 11th round of bidding that took place in April sponsored by the ANP (National Petroleum Agency). According to a KPMG executive, since the O&G sector had not had any bidding rounds for 5 years, a score of new business opportunities arose that attracted many foreign investors. Of these 22 operations, 10 were buy-outs, where foreign companies bought Brazilian companies in order to enter the market.

Another fact that relates to the rising volume of mergers and acquisitions is the fact that most of the companies that participated in the 11th bidding round had not participated in previous rounds and needed to secure infrastructure in the country in order to pursue their business goals.

The volume of mergers and acquisitions is expected to continue growing in the second semester due to the coming pre-salt round of bidding which will be offering the huge Libra pre-salt field with an estimated 8 to 12 billion barrels boe in reserves in October and of the onshore shale gas block slated to be held in November. Local operators such as OGX and HRT, which have been struggling with financial difficulties are also expected to look for foreign or national partners in order to inject new capital.

According to other market analysts this trend is expected to continue into 2014, as many operators and service providers are keen to enter the Brazilian O&G market. The influx of Chinese companies is definitely on the rise and some of these are considered strategically important by Petrobras and the Brazilian government.