US midstream deal value declines

The absence of mega M&A deals in oil and gas has led to a significant decline in deal value in the third quarter year on year, PwC has found.

While mergers and acquisitions (M&A) activity in the midstream sector has dropped slightly, the lack of mega-deals has led to a significant decline in deal value, the US energy practice of financial services firm PriceWaterhouseCoopers (PwC) said in its most recent quarterly report.

Divestitures continue to drive US oil and gas M&A activity, PwC said, with such transactions accounting for 84 percent of total oil and gas deals with values greater than $50 million.

While the total number of midstream deals of that size remained relatively steady – 43 transactions in the third quarter compared with 45 deals in the same quarter last year – deal value dropped 56.4 percent to $16.4 billion in the current quarter from $37.6 billion in the third quarter last year.

“Divestitures continue to drive deal activity,” said Doug Meier, PwC’s US energy sector deals leader. “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,” he added.

Despite the decline in deal value, PwC describes activity as remaining robust particularly in shale plays and in deals involving master limited partnerships (MLPs), a trend it expects will continue through to year end.

“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,” PwC said.