US oil and gas deals pick up in Q4

M&A activity in the US oil and gas industry picked up in Q4 driven by companies’ focus on maximising shareholder value and continued interest in shale plays, PwC finds.

The US oil and gas industry saw an uptick in merger and acquisition (M&A) activity in the fourth quarter of 2013, with 51 oil and gas deals accounting for $41.7 billion and shale plays representing 57 percent of that total value, the US energy practice of financial services firm PriceWaterhouseCoopers (PwC) said in its most recent quarterly report.

The uptick translated to a 154 percent increase compared with the third quarter of 2013 and to an annual total of 182 deals – with a value of $50 million or more – accounting for $115.9 billion.

A focus on maximising shareholder value and portfolio optimisation were the key drivers of M&A activity, a trend PwC expects will continue throughout 2014.

“Overall, M&A activity has been robust for a number of years in oil and gas,” PwC’s US energy sector deals leader Doug Meier said in a statement.

“We see that continuing as companies in the space focus on portfolio optimization – further investing in those assets that are generating strong returns and divesting those assets that are generating lower returns.”

The accelerated M&A activity in the most recent quarter was not enough, however, to keep 2013 from posting a year-on-year drop from the 212 deals worth $152.8 billion struck in 2012.

Deal volume and value in the fourth quarter of 2013 also posted a drop of 36 percent and 29 percent, respectively, compared with the same period in 2012, but this can be attributed to the fact that fourth-quarter 2012 deal activity was strongly influenced by pending changes in the US tax law, according to PwC.

Shale deals, however, increased both on a quarterly and on a yearly basis.

According to PwC, there were 27 such deals with values greater than $50 million in the fourth quarter of 2013 totalling $23.8 billion, a 338 percent increase in total deal value compared with the previous quarter.

For all of 2013, there were 79 shale deals that contributed $53.2 billion, an increase from 77 deals worth $51.7 billion in 2012.

“If shale plays continue to adapt more efficient production processes to optimize the play and improve returns, activity in unconventionals will continue to be robust,” said John Brady, a Houston-based partner with PwC’s energy practice.

While shale plays dominated in the fourth quarter in terms of deal value, asset transactions dominated in terms of volume, with 42 deals accounting for 82 percent of deal volume and worth $22.7 billion. For all of 2013, there were 154 asset deals worth $77.5 billion.

Private equity deal activity also increased. With 11 transactions representing $10.6 billion, deal value was up 48 percent in the fourth quarter last year compared with the same period in 2012.

“Increased activity by financial investors illustrates the continued interest in the energy sector,” PwC US energy and infrastructure deals partner Rob McCeney said. “Financial investor buyers added more midstream and oilfield services as corporate owners refocus on core operations,” he added.