Impact of Declining Crude Prices: Opportunity of strategic alliances for E&P operators

With the recent plummeting of crude prices, M&A deals in the upstream market are predicted to increase. With further consolidation and cost cutting measures expected across the globe, negotiation power of E&P operators is expected to decrease. Thus, it becomes increasingly important for the procurement professionals to act first and gain leverage for negotiation. The article focuses on the impact of declining crude prices and increased M&A activities on procurement practices for E&P operators. Upstream M&A Activity In 2013, upstream companies focused more on stimulating production and enhancing their reserves. This forced a decrease of almost 50% in the deal's value from the previous year. But M&A activities increased again in 2014 with the trend again shifting towards increasing assets and extending the market reach. M&A transactional value in the upstream oil & gas sector rose to USD 173 billion in 2014 which was an increase of 23% from USD 140 billion in 2013. Upstream market witnessed a robust growth of M&A deals in 2014. However, after the oil price collapse, the deal count lowered and was almost stagnant following the uncertainty in the market caused by plummeting crude prices.   Author: Rajesh Mohan Rana