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PWC: Shale plays help drive US M&A activity

Upstream and midstream assets associated with shale plays helped drive US oil and natural gas merger and acquisition activity during the second quarter, PWC US reported.

Oil and gas transactions reached $39 billion during the second quarter compared with $41 billion during the same period last year.

Both the number and overall value of transactions declined slightly in this year’s second quarter compared with the 2010 second quarter.

PWC noted the average deal value increased to $765 million for deals valued at more than $50 million during the latest quarter compared with an average of $672 million for the same time last year.

For its quarterly Oil & Gas M&A report, PWC analysts announced US transactions worth more than $50 million based on statistics from John S. Herold Inc.

Rick Roberge, PWC principal, energy M&A, reported “strong competition” for assets, noting the momentum appears to be continuing into the second half of the year.

When asked about recent stock market volatility, Roberge said he expected it to have only a “short-term” dampening effect for energy M&A activity.

“This isn’t a liquidity crisis,” Roberge said, noting private equity providers have plenty of capital.

“Private equity funds continue to make a very strong push in the oil and gas sector,” said Roberge. “The private equity deal makers, who used to largely play in the midstream space, are now heavily involved in exploration and production, shale plays, and oil field services and equipment sector.”

For deals valued at over $50 million, the second quarter 2011 activity included 11 midstream deals accounting for $19.9 billion compared with 6 deals worth $3.4 billion in the same period last year. Upstream transactions led M&A activity during the most recent quarter with 26 deals.

Seven of the top 10 deals by value in second quarter 2011 were associated with shale plays, and four of those seven involved upstream assets.

Regarding deals greater than $50 million, PwC reported 10 shale-related transactions totaling $7.5 billion, including 2 deals involving the Marcellus shale totaling $2.3 billion.

Liquids-rich plays are attracting the most interest with the Eagle Ford shale oil assets in south Texas currently bringing the highest prices, Roberge said.

Ongoing low gas prices have contributed to lower M&A values for gas plays such as the Fayetteville shale and the Haynesville shale, he noted.

Contact Paula Dittrick at

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