The oil and gas industry is going through some of the most volatile moments in its history. The price of oil had collapsed and hit an all-time-low in April 2020. In fact, the price went negative for the first time in history as oil and gas news became headlines around the world. Since then, prices have advanced by 200% from its all-time-low and are currently stable above the $30 levels.
However, the fall in prices has affected oil and gas transactions as buyers of oil/gas fields are renegotiating deals struck earlier at higher prices. For example, Premier Oil is seeking a lower price on North Sea assets that it had agreed to buy from BP for $625 million. French major Total has walked away from a deal struck with Occidental Petroleum for the latter’s assets in Ghana. According to Total, “Given the extraordinary market environment and the lack of visibility that the group faces… Total has decided not to pursue the completion of the purchase of the Ghana assets”
According to industry experts, the major oil companies have been more constructive in their willingness to relook at deal structures due to the changes in the price of oil. BP has agreed to new terms with Hilcorp Energy according to which the British major will provide vendor financing as well as receive smaller payments in 2020. Total has also agreed to restructure a $635 million deal with HitecVision.
On the brighter side, concerns surrounding the supply glut have eased as major producers have cut production and there has been a drawdown in US crude inventories. Demand is also slowly recovering in China. Oil prices, as a result, have started to climb again. Brent crude futures are trading at $36.40 as of 21st May 2020, up 37.4% for the month.