The total value of US oil and gas mergers and acquisitions
(M&A) increased significantly in 2011 due to continued
investment in shale plays and related infrastructure, sustained
interest from foreign buyers, and private equity entrants
deploying capital in the energy industry, according to a new
report from professional services firm PricewaterhouseCoopers
A major trend in the energy sector driving the increase in
deal value throughout the year was a shift towards more
investments in oil and liquid plays as natural gas prices
remained depressed, hitting a 10-year low in 2011.
In 2011, there were 191 deals with values greater than $50
million, accounting for $186.5 billion, a significant jump in
total deal value from the $138.5 billion during 2010, which had
five more announced deals.
Average deal size also increased in 2011 to $977 million, a 38%
increase from $706 million in 2010, driven by 32 mega-deals
(deals with values of $1 billion or more).
"M&A activity in the US oil and gas sector was extremely
active in 2011 as shale plays continued to attract the large
multinational energy companies, foreign buyers, and private
equity firms," said Rick Roberge, principal in PwC's energy
"New drilling techniques in hydraulic fracturing are
uncovering vast amounts of crude oil and natural gas in a very
accessible environment to oil and gas reserves
and this is what is contributing to the huge interest in shale
plays, Roberge continued.
The low price of natural gas, partially due to the
increase in supply, has also driven a shift toward more oil and
liquid plays as companies and investors look to take advantage
of oil prices, which is holding steady at $100/bbl.
We expect deal flow to remain active in 2012, despite
continuing economic uncertainty, due to attractive commodity
prices - which promotes exploration and development as well as
upstream M&A activity."
The final three months of 2011 had a total of 48 deals (with
values over $50 million) worth $80.5 billion, PwC said,
representing a 25% decline in volume but an 89% increase in
total deal value from the 64 deals valued at $42.6 billion
during the fourth quarter of 2010.
There were 11 corporate transactions with values greater
than $50 million, generating 72%, or $58 billion, of total
fourth quarter deal value - a 350% increase in total deal value
over the same period last year.
Thirty-seven asset deals with values greater than $50
million contributed $22.5 billion, compared to 51 asset deals
with a combined value of $29.7 billion seen during the fourth
quarter of 2010.
Although upstream deals made up the majority of activity in
the fourth quarter of 2011 with 23 transactions, or 48% of
total deal volume, accounting for $24 billion in transactions,
midstream deals represented 60% of total deal value with $48
billion and 12 transactions.
Oilfield equipment followed in deal activity and volume with
8 transactions totaling $4.5 billion, while downstream deals
contributed $4.1 billion with five deals.
There were 17 shale-related deals in the fourth quarter of
2011 with a total deal value of $57 billion, compared to 32
shale-related deals representing $29.3 billion during the final
three months of 2010.
Average deal value in the fourth quarter increased 209% to
$3.4 billion for shale deals.
In all of 2011, there were 68 total shale-related deals,
with values greater than $50 million - a decline from the 85
shale-related deals in all of 2010.
But the total value of shale deals in 2011 jumped 55% to
$107 billion from $68.9 billion in 2010.
In the upstream sector, shale deals represented 51% of total
upstream deal value in the fourth quarter of 2011, accounting
for 11 deals with a total value of $12.3 billion.
For full-year 2011, there were 55 shale deals in the
upstream sector that totaled $59.6 billion, or 81% of total
upstream deal value.
Included in all the shale-related deals in the fourth
quarter of 2011 were four transactions involving the Marcellus
Shale totaling $3.5 billion and three Utica Shale deals with a
total value of $3.6 billion.
For full-year 2011, there were a total of 13 deals in the
Marcellus Shale worth $9.9 billion, compared to 22 deals that
totaled $20.3 billion during 2010.
The Utica Shale had seven transactions that represented $6.7
billion in 2011, a jump from one deal in all of 2010, with a
value of $178 million.
"The industry continued to make a paradigm shift to shale in
2011 with virtually every major oil and gas company taking a
position in unconventional plays," said Steve Haffner, a
Pittsburgh-based partner with PwC's energy practice.
"Activity in the Marcellus Shale remained strong for patient
buyers waiting out the supply-demand dynamics of natural
gas, Haffner continued. Towards the end of last
year, we saw many investors looking at the Utica shale as the
next area of interest to take advantage of the more
liquids-rich resource, and its proximity to major metropolitan
Companies are now focused on building the related
infrastructure to transport the extracted oil and gas, which we
believe will likely be a key driver of M&A activity in
Foreign buyers announced 10 deals during the fourth quarter
of 2011 that had a value greater than $50 million, two fewer
deals when compared to the last three months of 2010.
Total deal value, however, increased in the fourth quarter
of 2011 to $13.9 billion from $9.4 billion during the same time
period in 2010.
For full year 2011, there were 40 transactions by foreign
buyers, five less than full year 2010, but total deal value in
2011 jumped 55% to $56.4 billion.
Additionally, the total value of the five financial
sponsor-backed transactions over $50 million increased
dramatically in the fourth quarter of 2011, representing $8.8
billion, compared to a total deal value of $353 million during
fourth quarter 2010, which had three deals.
For all of 2011, there were 10 deals that involved financial
sponsors, one less than in 2010 - although total deal value
skyrocketed to $13.2 billion in 2011 from $3.1 billion in
"International players invested heavily in US shale plays
through joint ventures in 2011 - and we believe a trend to
watch out for in 2012 is for foreign buyers to look to acquire
entire companies that operate in shale plays so they can take
more control of the assets through operatorship," said
"We also saw major private equity firms making big bets in
the energy industry in 2011 and we expect their activity may
accelerate as favorable oil price outlooks provide an
attractive investment rationale, Roberge added.
As deals continue in 2012, corporates and PE firms should
consider focusing on maximizing the assets they acquire and
ensuring they have the right deal strategies, integration plans, and controls in
place to successfully navigate this evolving and complex
PwC's oil and gas M&A analysis is a quarterly report of
announced US transactions with value greater than $50 million,
analyzed by PwC using transaction data from IHS Herold.