LONDON, May 11 (Reuters) - Deal making in the oil and gassector is set to accelerate as higher oil prices and an improvedoutlook for the sector boost investor appetite, Morgan Stanleysaid in a report on Monday.
Royal Dutch Shell's $70 billion bid for smallerBritish rival BG Group last month highlighted the shiftin sentiment in the sector after mergers and acquisitions(M&A)slumped in the first quarter of 2015 to a 20-year low, withonly 30 deals completed at a value of $4 billion, most of themin North America.
Since the start of the second quarter, 38 deals havecompleted with a total value of $93 billion, the bank said.
A 40 percent recovery in oil prices since hitting in Januarytheir lowest point in the current cycle and increased costcutting measures by oil producers have been the main drivers ofthe recent uptick in deal making.
"There is now meaningful momentum behind current cost andcapex (capital expenditure) savings programs in the industry,"Morgan Stanley said.
"With oil price risks skewed to the upside we see a 'sweetspot' of rising prices and falling costs leading to a freecashflow recovery for potential exploration and production (E&P)acquirers and accelerating M&A activity."
(Reporting by Ron Bousso, editing by Louise Heavens)
