Businesses in the oil and gas sector are preparing for an upsurge in mergers and acquisitions (M&A) this year, following a period of uncertainty in the industry.

This is according to Small Cap News, which reports that M&A activity in the sector was notably higher in the second half of 2009 than the previous six months and now looks set to continue this upward trend.

The news provider states that factors such as "better capital market conditions and growing consensus on oil price outlook" could encourage M&A activity during the first half of 2010.

Last year saw the number of completed global oil and gas M&A deals fall to 837, down from 1,152 in 2008.

However, in a recently completed review of global oil and gas transactions, Ernst & Young concluded that the outlook for the next 12 months is "positive".

Jon Clark, an oil and gas director at Ernst & Young, explained that an increase in the flow of equity capital, together with bigger exploration budgets and new development projects, should drive activity in the sector.

Hedge fund GLG Capital Partners recently told the Daily Telegraph that British firms should prepare for a slew of approaches from US organisations in the wake of Kraft's takeover of Cadbury.