Strategic Mergers and Acquisitions: An Enabler of Marginal Oil Field Development in Nigeria.

Abstract

The objective of this study was to evaluate the role of strategic mergers and acquisition (M&A) as a panacea for success of marginal oil fields development in Nigeria and to make recommendations for policy decisions. Data for the study were obtained from literature review, document analysis and multiple case studies from operating marginal oil field companies in Nigeria. The cases of Platform Petroleum, Sheba Petroleum, Seplat and others were investigated and analyzed. These case studies identified how marginal field operator's utilized mergers and acquisitions in the form of business restructuring, consolidation, strategic alliances, joint venture formation and partnerships as a development support strategy to remain competitive in the oil and gas industry. Other mergers and acquisitions activities by other companies were also examined. The study findings revealed that strategic mergers and acquisition is one of the survival options for marginal field operators in Nigeria. Mergers and acquisitions enhances the business growth for the marginal oil fields operators by expanding the opportunity for raising capital required for oil and gas operations and provision of larger equity base; including provision of access to technology and manpower. As the oil price in the global oil and gas market remains low, investors in oil and gas business are looking for ways to cope with the fall in revenues. In this dynamic business environment, one fact remains unchanged, marginal oil field operators in Nigeria must re-strategise in order to survive. The marginal oil field operators in Nigeria are encumbered by inadequate funds and other constraints such as lack of capacity, low volume of production and inadequate technology, therefore they have to adopt one of the critical success factors for business survival in a challenging environment. Herein lies the role of strategic mergers and acquisitions. The findings of the study will serves as a decision-making frame work for investors in oil and gas business wishing to participate in the sustainable management of marginal oil field in Nigeria. The study recommendations indicate that policy makers in Nigeria should create a favorable investment climate among which are: stable macro-economic policies, legal system that allows contracts to be enforced and clearly support access to channel of arbitration.