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Oil industry expects low deal volumes: survey

A pumping unit sucks crude oil from the ground near Manhattan, Kan. (AP Photo/Charlie Riedel)

Charlie Riedel/Charlie Riedel/AP

International oil and gas executives are often portrayed as a hubristic bunch, but when it comes to mergers and acquisitions, the big wheels are shying away from deals.

Only 31 per cent of energy executives expect to chase an acquisition in the next year, according to a survey conducted by Ernst & Young. This is down from 48 per cent in October, and the lowest point since 2009.

But it doesn't mean the top bosses are glum. The survey found 91 per cent believe they will maintain or increase their workforce, while 87 per cent believe the credit market is stable or improving. Further, 55 per cent believe the global economy is "strongly or modestly" improving, up from 22 per cent in Ernst &Young's October survey.

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"The most common reasons [for reluctance to make acquisitions]included low confidence in the broader business environment and limited deal execution and integration capabilities," Ernst &Young's report, released Thursday, said.

While takeovers make energy executives nervous, asset sales could become popular. Twenty-seven per cent of respondents expect to sell assets -- looking at you, natural gas companies -- as they deal with uncertain commodity prices, low share prices, and "low confidence" in the broader business environment.

Further, 47 per cent of the survey's respondents expect divestment activity to increase in the next 12 months, up from 20 per cent this time last year.

"Conservatism, driven by persistent volatility, has driven divestments up the corporate agenda," the report said.

The report, dubbed the Global Capital Confidence Barometer, surveyed more than 1,500 executives -- including 141 from the energy sector -- from 57 countries in February and March. The consulting company said the global trends it found in the energy industry are reflected in the Canadian market.

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About the Author

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

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