US oil and gas deal value hit ten-year high in Q3

Midstream and mega deals helped to accomplish a break-out quarter, the latest analysis by PricewaterhouseCoopers US showed.

The third quarter saw a record level of mergers and acquisitions in the oil and gas sector in the US, with deal value hitting ten-year high, thanks to midstream and mega deals, the latest analysis by PricewaterhouseCoopers (PwC) US showed.

A total of 78 oil and gas deals, or a total value of $123 billion, were recorded during the three months ending September, an increase of 81 percent in total deal volume and a 649 percent rise in total deal value from the same period last year, PwC said.

There were 43 oil and gas deals worth $16.4 billion in the third quarter last year, it said in the report.

On a sequential basis, deal volume in the third quarter increased by 20 percent from the 65 deals in the second quarter of this year, with total deal value increasing 152 percent from $48.9 billion in the second quarter, it added.

PwC said there were 14 mega deals during the third quarter, representing $103.5 billion, or 84 percent of total deal value. Eight of them were corporate deals.

Doug Meier, PwC US energy sector deals leader, attributed the “break-out” quarter to three drivers, including the significant impact of $1 billion-plus deals, foreign and private equity interest and the attractiveness of shale plays. In the meantime, the M&A flow in the third quarter was significant especially given crude oil and other commodity prices declined sharply during that period of time, Meier added in the report.

“If we continue to see a sustained lower crude (oil) 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,” he said.

There were 15 midstream deals, including three valued at more than $8 billion each that contributed $74.1 billion in value, a 50 percent growth in deal volume and 517 percent growth in deal value compared to the second quarter of 2014.

Foreign buyers announced 17 deals in the third quarter of 2014, accounting for $22.1 billion in value, an increase over nine deals worth $2.8 billion during the same period last year and the most deal activity in the last five years. On a sequential basis, the volume and value of foreign deals increased by 70 percent and 103 percent from the second quarter of 2014, respectively.

Corporate transactions led total deal value during the quarter, representing $99.1 billion, or 81 percent of total deal value for the third quarter of 2014. The 20 corporate transactions in the quarter represented the highest quarterly level since the fourth quarter of 2012.

According to PwC, there were 36 deals with values greater than $50 million related to shale plays in the third quarter of 2014, totaling $26.6 billion, or 46 percent and 22 percent of total deal volume and value, respectively. There were five midstream shale-related deals in the third quarter of 2014, accounting for $2.5 billion, an increase in value and volume from zero deals in the third quarter of 2013.

The most active shale plays for M&A with values greater than $50 million during the third quarter of 2014 include the Eagle Ford in Texas, which had seven deals with a total value of $1.8 billion, followed by the Bakken with six deals representing $8.6 billion. The Permian play had five deals worth $7.8 billion, the Marcellus Shale had four deals valued at $1.1 billion and the Niobrara had three deals worth $2.4 billion. The Utica Shale generated two deals, while the Haynesville and Fayetteville each generated one deal.