An Analysis of the Relationship Between Upstream Liquidity & Debt Metrics and M&A&D Transactions

Abstract

This thesis seeks to determine whether or not a relationship exists between the liquidity and debt metrics of E&P companies and the values at which they choose to pursue an acquisition or divesture; and, if a relationship does exist between liquidity and debt metrics and M&A&D transaction values, can it be characterized. The purpose of this thesis is to provide upstream oil & gas companies, and their advisors, with metrics to employ in attempting to efficiently identify the most suitable counterparts for M&A&D transactions, as it pertains to transaction value. The research of this thesis examined three common liquidity and debt metrics of buyers and sellers: cash & near cash items, net debt to EBITDA, and percent change from 52-week high of stock price. The results of the research found that only sellers' cash & near cash items and buyers' percent change from 52-week high of stock price had a statistically significant relationship with transaction value. Sellers' cash & near cash items had a positive relationship with transaction value. Buyers' percent change from 52-week high of stock price had a negative relationship with transaction value.