PwC: Plunging Oil will Light the Touchpaper for Mergers and Acquisitions in 2015

Many oil and gas companies in the UK will be cash-strapped and looking to cut costs, said PwC

The continued falling of oil prices is setting up 2015 as a big year for mergers and acquisitions in the oil and gas industry, said PricewaterhouseCoopers (PwC) while commenting on the industry outlook for the UK next year.

The company said that the plunging cost of oil, which is currently hovering around $60 per barrel, will make many oil companies cash-strapped in the new year, which will not be helped by reactive actions made by shareholders. 

“Oil prices remaining at the current level for a sustained period will light the touchpaper for mergers and acquisitions (M&A) in 2015," said Drew Stevenson, PwC's UK energy deals leader, adding that the UK oil and gas industry would be facing an uncertain future. 

The increased M&A will include increased paper-based transactions in the exploration and production sector and the supply chain, said PwC. 

It was also speculated that the year may see a raft of mega-mergers akin to BP’s merger with Amoco, which set off its own wave of mergers in 1998. 

“While $70 oil is not the end of the world, coming after five years of sustained high prices, it has caused a maelstrom in the industry, with firms now having to heavily focus on cash and costs like never before," said Matt Alabaster, PwC's UK energy deals strategy leader. 

"Throughout 2015, we could see some bad headlines about very good companies being hit by factors outside their control - the UK industry is not alone in having to adapt to this environment.”

The shipping industry has already seen a host of mergers and alliances this year, with Hapag-Lloyd and Compañía Sud Americana de Vapores (CSAV) having completed theirs earlier this month, and the 2M alliance with Maersk Line and Mediterranean Shipping Co. (MSC) expected to start as soon as January.