Foreign buyers and private equity investors returned to the deals table as buyers of energy assets during the third quarter of 2013, helping drive the bulk of merger and acquisition activity in the sector, according to PwC.
While divestiture activity contributed 36 total transactions, representing 84 percent of total deal volume, a significant decline in midstream M&A activity coupled with a lack of mega deals, resulted in a decline in deal value for the third quarter of 2013 compared to the same time last year.
For the three month period ended September 30, 2013, there were a total of 43 oil and gas deals with values greater than $50 million, accounting for $16.4 billion, a slight decrease from the 45 deals worth $37.6 billion in the third quarter of 2012. On a sequential basis, deal volume in the third quarter dropped by nine percent compared to the second quarter of 2013, with deal value falling by 46 percent during the same time period. Divestiture deals accounted for $13.9 billion in total deal value.
“After a brief pause in the second quarter, foreign buyers and private equity investors came back to the deal table in the third quarter looking for attractive assets to add to their portfolios,” said Doug Meier, PwC’s US energy sector deals leader. “Divestitures continue to drive deal activity. Acquirers continue to insist on performing broader and deeper diligence in order to get the right deal done at the right price. As a result, we continue to see increased demand for our divestiture services as sellers spend more time performing their own diligence on the assets to be divested before beginning the marketing process. While deal value declined, activity remains robust, including in the shale plays and with master limited partnerships – and PwC expects that to continue through the remainder of the year.”
For deals valued at over $50 million in the third quarter, upstream deals accounted for 26 transactions, representing 61 percent of total deal volume totaling $11.2 billion. Additionally, there were four midstream deals, accounting for nine percent of total deal volume in the quarter worth a total of $1.3 billion. There were 10 oilfield services deals worth $3.0 billion, and three downstream deals added $886 million.
Shale deals were also a major driver of deal activity in the third quarter, as 17 shale deals contributed $5.4 billion, or 33 percent of total deal value. In the upstream sector, shale deals represented 15 transactions and accounted for $5.0 billion, while the midstream sector saw no shale deal activity in the third quarter of 2013.
The most active shale plays for deals with values greater than $50 million during the third quarter of 2013 include the Eagle Ford in Texas with seven total transactions contributing $1.7 billion, the Bakken in North Dakota with three deals totaling $1.8 billion, followed by the Utica with two deals adding $284 million.
Financial investors’ deal activity returned in the oil and gas industry with six total transactions, representing $4.9 billion, or 30 percent of total deal value during the third quarter of 2013, compared to four deals, accounting for $1.5 billion, or five percent of total deal value in the second quarter of 2013.
“Financial investors continue to focus on exploration and production opportunities but stepped into three oilfield service transactions in the third quarter,” said Rob McCeney, PwC’s US energy private equity deals leader. “Financial investors also accounted for one mega exploration and production transaction in the third quarter and continue to seek orphan businesses from corporate sellers.”
PwC’s Oil & Gas M&A analysis is a quarterly report of announced US transactions with values greater than $50 million analyzed by PwC using transaction data from IHS Herold (www.ihs.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 11-1-13