Oil and gas industry the most merger intensive

Oil and gas transactions totalled a staggering $402 billion in 2012

With an average of over four transactions announced globally every day in 2012, the oil and gas sector has remained one of the most active sectors for mergers and acquisitions.

Oil and gas transactions totalled a staggering $402 billion in 2012, representing a 19 per cent increase compared to 2011, according to Ernst & Young's Global Oil and Gas Transactions Review.

A total of 92 transactions exceeded $1bn in value compared to just 71 in 2011.

This was despite a marginal decrease in oil and gas transaction volumes from 1,664 deals in 2011 to 1,616 in 2012.

Middle East transactions remained concentrated on Kurdistan, with four of the five biggest deals concerning assets or operations in the oil-rich region of Iraq.

Overall, there were 45 transactions in the Middle East region, an increase of 14pc from 2011.

However, the average transaction size decreased from $3.6bn to $2.8bn.

"Last year saw a continuation of trends we have seen for the last few years supported by a relatively stable oil price," said Ernst & Young Middel East and North Africa oil and gas leader D Thorsten Ploss.

"The increase in the number of larger deals globally was a function of more capital becoming available to the right class of buyer, together with increased pressure from asset and company owners to crystallise returns.

"Companies remain cautious in more mature markets due to the uncertain demand picture, driven by an uncertain economic outlook and austerity measures in Europe," he said.

"The region appears to be facing many of the same geopolitical and economic uncertainties as 2012," he added.

"Based on current trends, we expect activity to continue, although political uncertainty in North Africa will continue to depress activity there.

"In the absence of material shocks, we expect the sector to remain resilient.

"Key strategic drivers remain the same.

"Participants have become accustomed to making decisions in a highly uncertain environment.

"While capital availability is generally improving, funding remains a challenge for smaller companies," he said.

"Cash constraints, coupled with cost escalation, is likely to drive both asset and corporate opportunities. "Larger companies with stronger balance sheets are most likely to be the beneficiaries," he added.