Divestures continues to drive deal activity in the US oil
and gas sector, as foreign buyers and private equity (PE)
players returned to the table as buyers of energy assets during
the third quarter of 2013.
This activity is driving the bulk of merger & acquisition
(M&A) activity in the sector, according to PwCs
third-quarter M&A analysis for the oil and gas sector,
which was released on Thursday.
While divestiture activity contributed 36 total transactions,
representing 84% 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 as compared to the same time in 2012.
For the three-month period ended September 30, there were a
total of 43 oil and gas deals with values exceeding $50
million, accounting for $16.4 billion. It is a slight decrease
from the 45 deals worth $37.6 billion in the third quarter of
On a sequential basis, deal volume in the third quarter dropped
by 9% compared to the second quarter of 2013, with deal value
falling by 46% during the same time period. Divestiture deals
accounted for $13.9 billion in total value.
After a brief pause in the second quarter, foreign buyers
and PE players came back to the deal table in the third quarter
looking for attractive assets to add to their portfolios,
said Doug Meier, PwCs US energy sector deals
Divestitures continue to drive deal activity, he
continued. Acquirers continue to insist on performing
broader and deeper diligence 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 (MLPs) - and PwC expects that to continue through
the remainder of the year.
Foreign buyers announced nine deals in the third quarter of
2013, which contributed $2.8 billion or 17% of total deal
value, vs. four deals valued at $4 billion during the same
period last year. On a sequential basis, the number of total
deals increased 800% from just one foreign deal.
For deals valued at over $50 million in the third quarter,
upstream deals accounted for 26 transactions, representing 61%
of total deal volume totaling $11.2 billion. Additionally,
there were four midstream deals, accounting for 9% of total
deal volume in the quarter worth a total of $1.3 billion. There
were 10 oilfield services deals worth $3 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% of total deal value. In the upstream sector, shale deals
represented 15 transactions and accounted for $5 billion, while
the midstream sector saw no shale deal activity.
The most active shale plays for deals with values greater
than $50 million during the third quarter 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
Financial investors deal activity also returned in the
oil and gas industry with six total transactions, representing
$4.9 billion, or 30% of total deal value during the third
quarter of 2013, compared to four deals, accounting for $1.5
billion, or 5% of total deal value in the second quarter of
Financial investors continue to focus on exploration and
production (E&P) opportunities but stepped into three
oilfield service transactions in the third quarter, said
Rob McCeney, PwCs US energy private equity deals leader.
Financial investors also accounted for one mega E&P
transaction in the third quarter and continue to seek orphan
businesses from corporate sellers.
PwC noted that in the third quarter of 2013, MLPs were involved
in 11 transactions, representing 26% of total deal activity.
Overall, MLPs have generated 34% of total deal activity for the
first three quarters of 2013. Of those 11 deals, four were
upstream MLPs, or 36% of total MLP activity in the third
MLPs, including those focused on the upstream space, are
continuing to have a strong presence in the deal market -- and
PwC expects this to continue, said Meier. MLPs use
deals to grow distributions to unit holders, and theyre
taking advantage of the attractive debt and equity markets to
finance these deals."