More than two-thirds of global oil and gas executives expect to pursue an acquisition in the next 12 months, a recent survey by advisory firm EY has found.

In its Oil & Gas Capital Confidence Barometer, EY noted that this represented a 10 percentage point increase from deal expectations reported in April and followed a lacklustre market to date.

Deal volume in the oil and gas sector in the first three quarters of 2015 was dismal, with activity falling nearly 40% from the same period in 2014.

Furthermore, deal value through the third quarter of 2015 had also fallen below comparable levels for 2014 and 2013, EY reported, taking into account that nearly 70% of the year-to-date’s value derived from a single transaction with Shell acquiring the BG Group.

However, EY noted that nearly 90% of oil and gas executives expected the merger and acquisition (M&A) market to improve in the next 12 months, which was a sharp increase from 50% of respondents a year ago.

“Declining M&A activity in the oil and gas sector in the first part of the year resulted from, in part, a lack of quality assets on the market. That’s changing and now we’re seeing companies looking at multiple acquisitions,” said EY global oil and gas transaction leader Andy Brogan.

He noted that 58% of executives already had three or more deals in the pipeline compared to 12% six months ago.

While transaction announcements in recent months had shown the climate for large acquisitions remained accommodative, the majority of deal volume was expected to come from middle market deals valued under $250million.

Brogan said that the upper-middle market was also gaining traction, with 33% of companies planning deals between $250 million and $1billion. While the appetite for deals was on the rise, challenges persisted, with 83% of companies either having failed to complete or cancelled a planned acquisition in the last year.

“Competition from other buyers tops the list of challenges facing companies pursuing acquisitions. Concerns about regulatory or antitrust reviews and a widening valuation gap are also influencing executives’ willingness to withdraw from acquisitions,” Brogan added.

Continued oil price volatility has widened the valuation gap between buyers and sellers in recent months, Brogan said, adding that the majority of executives believed the gap was larger than six months ago, but 66% expected it to remain the same as companies adjust to a lower-for-longer price outlook.

“There’s a stronger sense of determination across the oil and gas industry that’s setting the stage for a more active M&A market in the year ahead. Executives continue to focus on conserving cash and reining in costs but are considering acquisition opportunities more seriously. Transactions will play a major role in determining who survives the downturn in prices.”