(EnergyAsia, May 18 2012, Friday) — The oil and gas industry is taking a cautious attitude towards mergers and acquisitions despite higher oil prices, improving access to capital, increasing economic optimism and a generally more favourable deal environment, said consultant Ernst & Young.

In its sixth Global Capital Confidence Barometer survey, Ernst & Young said oil and gas respondents expect divestment activity to increase over the next 12 months, with 47% of global respondents in April 2012 expecting to sell assets compared with 20% a year ago.

Companies in the Asia Pacific region were more adventurous than the rest of the world, with 42% respondents stating they are likely to divest, up from 28% six months ago. On a global basis, the survey found that only 31% of companies expect to divest assets in the next year, up from 20% a year ago.

Sanjeev Gupta, Ernst & Young’s Asia-Pacific Transactions Advisory Services Leader for Oil and Gas, said that 78% of the region’s respondents view the global economy as stable or improving.

“They also show a marked upswing in confidence at the global level for corporate earnings, economic growth, employment growth and credit availability from six months ago. They still don’t view these metrics as positively as all global executives, and are still concerned with the regulatory environment,” he said.

He found that 52% of all respondents view the global economy as improving, compared with 29% of Asia’s oil and gas executives. Significantly only 22% expect see the economy to weaken compared with 50% when interviewed six months ago.

Mr Gupta said 48% of the respondents from the region feel the local economy is improving, up from 39% six months ago.

He also found that 89% of the region’s respondents believe the Eurozone crisis has affected their business.
In response, 56% of them are looking to reduce cost or implement supply chain transformation to counter revenue and cost pressures and risks.

Asia’s oil and gas executives also displayed a higher level of confidence towards global credit availability compared with six months ago.

Ernst & Young said: “Today, 89% of Asia-Pacific respondents view credit conditions as stable or improving which brings them on par with their global colleagues, 87% of whom share this view today, and more confident than the global sample (75%).

“Just under half (42%) of Asia-Pacific oil and gas respondents are planning to refinance their debt over the next year.”