Total, BP and ExxonMobil extract most upstream value from mergers

Total, BP and ExxonMobil have extracted the most upstream value from a frenzy of mergers and acquisitions among major oil companies in recent years, according to a new study by independent energy consultant Wood Mackenzie.
The study attempts to quantify the additional value created in oil companies' upstream operations -- which include exploration and production -- through purchases from 1996-2002. During the period, major oil companies consolidated dramatically, completing a series of mega mergers and major acquisitions.

Wood Mackenzie, an Edinburgh-based energy consultant, found that Paris-based Total topped a list of 11 large, integrated oil companies for value creation through acquisitions, achieving just under 15 % return on acquisition spending in the period. The company, which made 10 major deals over the period, bought Belgian refiner Petrofina in 1999 and French oil company Elf Aquitaine in 2000.
London-based BP -- which swallowed Amoco in 1998 and Atlantic Richfield in 2000 -- and ExxonMobil returned about 14 % on acquisition expenditures, Wood Mackenzie found. ExxonMobil, Irving, Texas, resulted from a mega merger between Exxon and Mobil in 1999.

The report attempts to value each acquisition by the majors at the time of the deal and at present, taking into consideration changes in commodity prices, new oil discoveries and other internal value added to the companies or businesses acquired.
Many of the best performing companies clinched major tie-ups or purchases in 1998 and 1999 when oil prices were low, benefiting greatly as prices recovered dramatically to their high levels today.

Shell Group, which shied away from a major tie-up, made just over 11 % return on acquisition spending, Wood Mackenzie found.
The Anglo-Dutch giant made a string of small acquisitions in the period, including an equity swap in 2000 for an interest in an oil and natural gas project on Sakhalin Island in Russia's Far East and last year's purchase of British independent oil company, EnterpriseOil.