Australia’s upstream M&A market could see up to $27 billion worth of assets put for sale, a new analysis by Wood Mackenzie estimated on Thursday.
According to senior analyst David Low, the goals of most upstream operators are getting simpler: “squeeze maximum value from existing operations, and divest mature, non-core, on-stream low-margin and/or carbon-intensive assets where possible.”
This pretty much reflects the case for Australian upstream scenario, which already has $10 billion of assets on the market, Kallanish Energy reports.
The Australasian portfolios of oil majors are up to two times more carbon-intensive than their global average, Low said. “If energy transition targets are to be hit, this means more upstream M&A activity in the region,” he added.
Total, bp and Shell all hold Australian LNG assets with high carbon footprints, alongside ambitious goals to increase their global LNG portfolios and achieve carbon neutrality.
As operators progress their business restructuring towards a net-zero future, more M&A activity is expected. Yet, deals aren’t expected to be made easily, as agreeing the price of such assets may be a major challenge.
Wood Mackenzie believes potential buyers could include infrastructure funds and utilities; institutional investors and private equity; domestic buyers; and regional buyers.
With majors already saying they won’t sell if internal valuations aren’t met, the next 12 months should offer a better insight on which route companies choose: the price setters or price takers.
This post appeared first on Kallanish Energy News.