PwC: US M&A activity down in 2013 despite strong finish

The US oil and gas industry finished 2013 strong when it came to mergers and acquisitions, but the late-year push to a total of 182 deals adding up to $115.9 billion wasn’t enough to match the 212 deals worth $152.8 billion in 2012, PwC US Energy Practice said in a report released Jan. 28.

The increased fourth-quarter activity resulted in 51 oil and gas deals with values greater than $50 million, accounting for $41.7 billion, a 154% increase from the third quarter.

However, deal volume in fourth-quarter 2013 declined 36% compared with fourth-quarter 2012, with deal value dropping 29% during the same time period, in large part due to pending changes in US tax law, PwC said.

Asset transactions in deals of more than $50 million dominated total M&A deal volume during last year’s fourth quarter, totaling 42 deals representing 82% of total deal volume. Deal value for asset transactions reached $22.7 billion, 54% of total deal value for fourth-quarter 2013.

There were a total of 154 asset deals worth $77.5 billion in 2013, along with 28 corporate transactions contributing $38.4 billion.

Shale focus

Shale plays were represented in 27 deals with values more than $50 million in fourth-quarter 2013, totaling $23.8 billion, a 338% increase in total deal value compared to the third quarter.

Overall for the year, oil and gas companies partook in 79 shale deals valued at $53.2 billion, an increase of $51.7 billion from 2012.

There were 19 total upstream shale deals representing $11 billion, compared with 15 total deals worth $5 billion in third-quarter 2013. Midstream shale-related deals totaled eight for the fourth-quarter 2013, representing $12.8 billion.

“In the fourth quarter of 2013, shale deal activity increased along with broader conventional industry activity, especially in the Marcellus shale,” said John Brady, a Houston-based partner with PwC’s energy practice.

The most active shale plays for M&A with values greater than $50 million in fourth-quarter 2013 were the Eagle Ford with five deals totaling $6.5 billion and the Marcellus with four deals representing $1.1 billion.

The Eagle Ford and Marcellus were also the most active shale plays in the second quarter. In M&A deals with values greater than $50 million, the Eagle Ford was the site of three transactions contributing $1.5 billion total while the Marcellus saw three deals totaling $416 million (OGJ Online, Aug. 19, 2013).

“[The Marcellus] bounced back in the quarter, as stronger performance per well has reinvigorated returns, driving additional interest in acreage in the Northeast. If shale plays continue to adapt more efficient production processes to optimize the play and improve returns, activity in unconventionals will continue to be robust,” Brady remarked.

The Niobrara and Utica each contributed two deals valued at $1.2 billion and $263 million, respectively.

Types of deals

Upstream deals accounted for 59% of activity in fourth-quarter 2013 with 30 transactions, representing $19.8 billion, 47% of total fourth quarter deal value. Of those deals, 10 were oil and four were gas.

Nine midstream deals contributed $14.1 billion, a 994% increase in deal value from third-quarter 2013. Seven downstream deals during fourth-quarter 2013 added $4 billion while oil field services contributed five deals worth $3.7 billion.

Master limited partnerships were involved in 54 transactions overall in 2013, about 30% of total 2013 deal activity, consistent with recent historical levels.

PwC pointed out there were eight megadeals in fourth-quarter 2013 valued at a total of $26.4 billion, compared with three megadeals worth $6.4 billion in third-quarter 2013.

Also, foreign buyers announced four deals in the fourth quarter, contributing $541 million, compared with 10 deals valued at $3.4 billion during the same period in 2012.

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