Corporate Finance
The extreme volatility of oil and gas commodity prices and corporate market values will continue. Traditional strategy and valuation approaches are unable to cope with the short-term volatility and longer-term uncertainties. There are consequent implications on financing, cashflow forecasts, and expected levels of leverage. This trend is being driven by the convergence of supply capacity and demand, accompanied by increasingly more demanding finding and developing technology requirements (e.g., extended reach horizontal drilling, multi-stage reservoir fracturing), the intense pressure on the industry to innovate, and the growing need for capital to finance expansion strategies.
Oliver Wyman helps large-scale financial investors develop an oil and gas investment strategy, identify suitable investment segments, select and evaluate the right target companies, and evaluate their future value potential. In addition, Oliver Wyman assesses the target company’s ability to change its business model and manage the “buy and build” process. Oliver Wyman Transaction Services provides Broker-Dealer support, as required.
Recent project examples include:
Mergers & acquisitions: For two large U.S. energy companies considering a merger, facilitated a synergy valuation assessment in a unique arrangement, working collaboratively with both the acquiring and target companies. The work helped the companies identify the true acquisition value, which led to a formal bid for the target.
Due diligence: Performed opportunity assessment and target evaluation in the energy equipment market for a private equity firm. Assessed fundamental market demand and customer trends. Used proprietary knowledge and performed customer research to evaluate acquisition target. Provided analysis and strategic assessment that helped the client to avoid an excessive bid.
Restructuring and spin-off: Provided alternative strategy assessment for drilling unit of a national oil company. Oliver Wyman team identified and evaluated business models to redefine the drilling business unit and to improve competitiveness. The team also evaluated strategic options and identified operational and organization improvement opportunities. Company implemented the proposed partnership/JV strategy with international drilling companies.
Opportunity assessment: For a large international conglomerate, created entry strategy for the U.S. natural gas market, including a strategic assessment of growth potential, economics, supply and demand dynamics, regulatory environment, and competitive landscape for each sub-sector in the value chain. As a result of the project, supported investment of approximately $1 billion.
