M&A and the Energy Transition

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The energy transition is affecting every aspect of the oil and gas industry, forcing the major players to re-evaluate how they do business. This is especially stark in the mergers and acquisitions space. However, the ongoing crisis in Europe, caused by the Russian invasion of Ukraine, has exacerbated this issue. As Andy McAuslan, Vice President M&A of bp, put it at the AIEN International Energy Summit, “why would you invest in anything at the moment when you have no idea what is going to happen?”.

Andy noted that if a company has a good ESG story, it can probably still attract money, but the funds just aren’t available the way they used to be.

Katie Jackson, EVP Acquisition, Divestment & New Business Delivery at Shell International, agreed with this. “There is a huge level of uncertainty and risk, which makes the teams of both sides of the deal cautious. There is a huge amount of capital to be deployed which is looking at opportunities in the new energy sectors. But in the asset markets, there are more opportunities than buyers.”

Although the energy transition is changing the face of M&A in the industry, it is the ongoing volatility that is having the biggest impact. Andy said: “At this level of volatility, it becomes hard to do a transaction on any scale. For example, I couldn’t sell exploration on any scale in terms of value – people don’t know how to look at that. And when you look at the world today, you have no idea what it will look like in in five years’ time.”

Both agree that there is a wealth of opportunity in the sector, for both old and new energies, if M&A teams are able to weather the current storm.