Upstream Mergers and Acquisition Deal Valuation - A Global and Africa Outlook with Perspectives for Nigeria

The objective of this paper is cast as a historical narrative of the global oil and gas upstream M&A activity as revealed by such metrics as deal count, deal value, quantum of proved reserves up for M&A and the accompanying segregation by region, deal category, and terrain location of deal asset. Furthermore, the study contemplates the question on the character of the next cycle of M&A activities within the Nigerian upstream space. Additionally, the paper explores the possibility of adjusting valuation methodologies based on the result obtained. For this assessment, the paper relies on a database of M&A transactions which contains 6,444 deals from 2001 to 2017 (Sept.). The database is queried for deals for which there is a reported deal value thus allowing M&A deal activity to be tracked, trended, and correlated. This provides a critical look back on the dynamics of the M&A market with a view to offer an outlook of the M&A deal space. Approximately 77% of the parent database size contain transactions with deal value recorded. Both the annual M&A deal count, and the deal value closely track the trend for oil price with correlation coefficients of 76.34% and 65.84% respectively. Over seventeen years from 2001, an estimated $2.22Trillion (RT2016) of M&A value has been transacted, 56% of which has been due to transactions primarily in North America, 17% in Russia and the Caspian, 8% in Europe and 5% in Africa. Segregating deal value by asset location reveals a constrast between deepwater and onshore. In terms of value, DEEPWATER acquisitions totaled $230Billion (RT2016) globally over the 17year period, which is only 15% that of ONSHORE acquisitions while the aggregate unit deal value for DEEPWATER at $19.50/BOE (RT2016) is more than 2–times that of ONSHORE acquisitions. Within the Africa M&A deal space, data shows that deal value is driven primarily by oil price and proved Serve Size (in MMBOE), with the greater impact due to the Proved Reserve size in the target deal where a 10% change each in Reserve size and Oil Price results in 10.74% and 8.53% change in deal value respectively. To further the study, a closer look at the Nigeria M&A space was undertaken.