The value of US reserves involved in oil and gas transactions rose in the third quarter of 1999, even though the number of transactions remained relatively flat vs. second quarter.
This was among the findings of Cornerstone Ventures LP, Houston, in an analysis of oil industry merger and acquisition (M&A) deals.
Based on 23 transactions for which financial and reserves data were disclosed, the median reserves value increased to $4.66/boe in third quarter from a second quarter revised value of $4.00/boe. At 55, the total number of deals was essentially flat vs. second quarter's 57 transactions, says Cornerstone.
"The level of deal activity was surprisingly low but is expected to improve during the next several quarters because capital is becoming more accessible," the investment banking firm said.
Onshore US oil and gas M&A deals for the third quarter were worth a total of $4.037 billion-a 107% increase from second quarter's revised aggregate deal value. This total comprised 24% cash, 26% stock, and 50% debt, Cornerstone said.
Of the 42 third quarter deals for which values were reported, says Cornerstone, 6 were categorized as large (>$100 million), 3 were valued at $50-100 million, 7 at $25-50 million, and 26 at less than $25 million.
Gas, oil statistics
The number of gas-dominated transactions in the third quarter accounted for 78.3% of the deals disclosed. This was a notable increase over the second quarter's revised 42.9%, says Cornerstone.
"This shift back to gas occurred as buyers perceived more stability in gas prices compared with the greater volatility in the price of oil," Cornerstone said. "In terms of actual reserves, gas accounted for 64.9% of boe traded, up from second quarter's revised 53.1%."
Gas made up about 86% of the barrels of oil equivalent that were traded during the third quarter, excluding the merger of Devon Energy Corp. and PennzEnergy Co. (OGJ, May 31, 1999, p. 29).
The median price paid for gas-dominated deals was $0.791/Mcfd-a 7.4% increase over second quarter's figure, says Cornerstone.
During the third quarter, reserves values were reported for 23 of the M&A transactions. Of these deals, five involved well over half of the total reserves quantity traded.
"Primarily due to the Devon-PennzEnergy merger," said Cornerstone, "these oil-dominated deals constituted over $2.5 billion, or 63% of the total aggregate deal value for the quarter."
Again excluding the Devon-PennzEnergy deal, oil-dominated transactions totaled $79 million, says Cornerstone.
The median value for oil-dominated deals during the third quarter was $4.41/boe, a 13.1% increase over second quarter's revised median. Sellers were getting $3.88/boe during second quarter 1998, notes Cornerstone.
