OREANDA-NEWS. Almost 90pc of oil and gas companies have cancelled or failed to complete planned acquisitions over the past 12 months, as the gap between buyer and seller expectations remained wide despite the lower oil price environment, according to UK consultancy Ernst & Young (EY).

"There is — surprisingly — relatively little distress-driven activity given the current market situation, but this could change," EY's global oil and gas transaction leader Andy Brogan told Argus.

Some 58pc of the firms surveyed by EY for its latest Oil and Gas Capital Confidence Barometer report expect merger and acquisition (M&A) activity in the oil and gas industry to improve in the next 12 months, with just over half the surveyed companies looking at deals of more than $250mn.

"People with money are looking to pick things up on the cheap, but still sellers have been reluctant to divest at what they consider to be undervalue — the end result has been very thin transaction volumes," Brogan said. "There does seem to be a renewed appetite to divest from some of the larger players, and that could help with price discovery."

The US, UK, UAE, Canada and Brazil are the top investment destinations, according to the survey.

"North Sea is being actively targeted as a 'starter pack' location but getting over the hurdles of return, sufficient operated assets, manageable decommissioning exposure and manageable legacy organisation costs has proved difficult," Brogan said. "We do expect some activity here though."