PwC: US oil, gas transaction value hits 10-year high in 3Q

Oct. 29, 2014
Driven by a rise in billion-dollar deals, midstream activity, and interest in upstream shale plays from foreign buyers, mergers and acquisitions in the US oil and gas industry reached the highest levels in the past decade during the third quarter, according to a quarterly report from PwC US Energy Practice.

Driven by a rise in billion-dollar deals, midstream activity, and interest in upstream shale plays from foreign buyers, mergers and acquisitions in the US oil and gas industry reached the highest levels in the past decade during the third quarter, according to a quarterly report from PwC US Energy Practice.

During the 3-month period ending Sept. 30, 78 oil and gas deals with values of more than $50 million took place, accounting for $123 billion in total value, compared with 43 deals worth just $16.4 billion in last year’s third quarter. That represents 649% growth in total deal value.

For further comparison, second-quarter volume totaled 65 deals and value totaled $48.9 billion (OGJ Online, July 30, 2014). Notably, fourteen megadeals occurred during the third quarter, representing $103.5 billion.

Foreign buyers, which took part in the most deals in the last 5 years, announced 17 deals during this year’s third quarter, accounting for $22.1 billion in value, an increase over 9 deals worth $2.8 billion during the same period last year. Volume and value of foreign deals, on a sequential basis, increased a respective 70% and 103% from this year’s second quarter.

“This extraordinary deal activity occurred while commodity prices declined sharply during the quarter—a trend that accelerated in the first half of October,” said Doug Meier, PwC’s US energy sector deals leader.

“If we continue to see a sustained lower crude pricing environment, we will likely witness an acceleration of the portfolio restructuring efforts we’ve been seeing in the past couple of quarters as companies focus on the importance of financial discipline.”

Deal breakdown

Fifteen midstream deals occurred during the quarter, including three valued at more than $8 billion each that contributed $74.1 billion in value. That represents 517% growth in deal value vs. the second quarter.

Upstream deals accounted for 54% of total deal activity in the third quarter, with 42 transactions representing $29.4 billion. The total number of downstream deals was unchanged at nine, but total deal value decreased to $8.4 billion. During the second quarter, downstream deals totaled $9.3 billion.

The number of oil field services deals increased to 12, with total value rising 313% to $11.1 billion compared with the second quarter. Master limited partnerships (MLPs) were involved in 14 transactions, representing 18% of total deal activity in the quarter, consistent with historical levels, PwC indicated.

Unconventional focus

As with previous quarters, deals targeting shale plays represented almost half of all deal activity, with 36 deals taking place totaling $26.6 billion.

Upstream shale deals represented 28 transactions and accounted for $23.1 billion. There were five midstream shale-related deals accounting for $2.5 billion. No midstream deals took place in last year’s third quarter.

Seven deals occurred in the Eagle Ford totaling $1.8 billion—the most of all the major US shale plays. The Bakken followed with six deals totaling $8.6 billion, the highest sum of the group.

Five deals worth $7.8 billion took place in the Permian. The Marcellus had four deals valued at $1.1 billion, and the Niobrara had three deals worth $2.4 billion. The Utica generated two deals, while the Haynesville and Fayetteville each generated one deal.

“The third quarter saw the highest number and value of shale deals in any third quarter over the last 3 years,” said John Brady, a Houston-based partner with PwC’s energy practice. “However, a challenge E&P companies are facing is bridging the resource and organizational gaps in land administration and operations following acquisitions,” he noted.