Oil price volatility is holding back mergers and acquisitions (M&A) activity in the industry, according to a new report.
With falling energy prices, distressed sales and bankruptcies in the oil and gas sector, M&A levels are widely predicted to increase.
But research by law firm Clyde and Co has shown that the "inevitable" wave of activity has yet to materialise.
The firm said 78 per cent of oil and gas executives it surveyed are taking a “cautious response to recent market changes”.
The remaining 22 per cent of the 78 executives surveyed “are preparing to adopt an aggressive or opportunistic stance”.
Philip Mace, corporate partner at Clyde and Co, said: "The fact that four fifths of businesses are still taking a cautious approach to market changes could mean the so called 'inevitable' wave of M&A activity is not quite round the corner.
"Businesses are clearly still assessing their options in order to make a more calculated approach to M&A."
He added: "There are still several obstacles blocking M&A activity; volatility in the oil price is the main one. When the price has shifted so significantly, and predictions about the future vary widely, it is often difficult for sellers and buyers to agree on suitable valuations."
Clyde and Co found that 45 per cent of executives have an appetite for strategic business growth or acquisitions activity in the coming year, compared with 31 per cent who are currently motivated to divest assets.
The firm said: “These figures suggest that many businesses are planning a tactical approach to invest in future growth at attractive prices, but many potential sellers may still be delaying disposal decisions.”
Last month, an oil and gas M&A survey from Brunswick Group reported that 62 per cent of 106 bankers, industry advisors, investment managers and analysts specialising in the energy sector expect activity to increase.
This was up from 52 per cent when the survey was carried out in 2015.
Brunswick said: "Key drivers of these deals are expected to be falling energy prices, distressed sales, and bankruptcies."