PwC: Foreign Buyers Boost US M&A Activity in 1Q

The acceleration of deals at the end of last year to get ahead of the fiscal cliff and the seasonality of low first quarter deal volume resulted in a decline of oil and gas merger and acquisition (M&A) activity in the first three months of 2013 compared with fourth quarter 2012, according to PwC US. While private equity (PE) activity moved to the sidelines, deal activity was propped up by foreign buyers, who focused on the upstream sector, and strategic investors who continued to look for opportunities in shale plays. These factors led to an increase in both deal volume and value compared to the same time period in 2012. 

For the three month period ending March 31, 2013, there were a total of 39 oil and gas deals with values greater than $50 million, accounting for $27.0 billion in deal value, an increase from the 34 deals worth $25.7 billion in the first quarter of 2012. However, on a sequential basis, deal volume in the first quarter of 2013 dropped 48 percent from the 75 deals in the fourth quarter of 2012, with total deal value in the first three months of the year declining 52 percent from $56.2 billion in the fourth quarter of 2012.

"With the acceleration of deal activity in the final three months of 2012 due to the looming fiscal cliff, in addition to the seasonal slowdown of deal making during the first quarter, we had anticipated this drop-off in M&A activity," said Rick Roberge, principal in PwC's energy deals practice. "Foreign buyers, though, are still looking for opportunities to expand in U.S. shale plays and are extremely active in upstream prospects – and they're willing to acquire those assets at a premium. At the same time, while private equity activity in the oil and gas industry recently hit an all-time high, the increase in asset valuations has caused them to move to the sidelines so far this year. However, we expect private equity involvement to pick up, in line with our outlook in The US Energy Revolution: The role of private equity in oil and gas."

Foreign buyers announced nine deals in the first quarter of 2013, which contributed $4.1 billion or 15 percent of total deal value, versus six deals valued at $5.9 billion during the same period last year. On a sequential basis, the number of total deals remained the same as total deal value increased 28.1 percent.

Private equity deal activity in the oil and gas industry dropped in the first quarter of 2013 with only two transactions with values greater than $50 million, which represented a total deal value of $576 million, compared to seven financial sponsor-backed deals worth $13.0 billion in the first quarter of 2012.

Additionally, there were 34 strategic deals that contributed $26.4 billion and made up 98 percent of total deal value in the first three months of 2013.

There were 35 total asset transactions, representing 90 percent of total deal volume, which contributed $17.2 billion – a 30 percent increase in deal volume from the 27 asset transactions during the first quarter in 2012, but a slight decline from the $18.2 billion in total deal value during the same period last year. There were four corporate transactions totaling $9.8 billion in the first three months of 2013, a small dip from the seven corporate deals during the first quarter of 2012, although deal value had increased from $7.4 billion.

For deals valued at over $50 million, upstream deals accounted for 23 transactions, representing $12.6 billion, or 47 percent of total first quarter deal value. The number of oil deals within the upstream sector totaled 11, compared to five upstream gas deals in the quarter. There were 11 midstream deals that contributed $10.0 billion, a 120 percent jump from the five midstream deals during the first quarter of 2012, which totaled $3.2 billion. Three downstream deals during the first quarter of 2013 added $3.9 billion, while oilfield services contributed two deals worth $465 million.

According to PwC, there were 18 deals with values greater than $50 million related to shale plays in the first quarter of 2013, totaling $16.3 billion, or 60 percent of total deal value. In the upstream sector, shale deals represented 11 transactions and accounted for $5.0 billion, or 40 percent of total upstream deal value in the first quarter of 2013.

Included in the shale-related deals in the first quarter of 2013 were three transactions involving the Marcellus Shale totaling $882 million and two Utica Shale deals that contributed $283 million. Compared to the first quarter of 2012, Marcellus Shale deal volume was flat, although total deal value decreased from $3.0 billion. Utica Shale deal activity increased from one transaction worth $112 million during the first three months of 2012.

"The main story in the first quarter of the year continues to be about shale. We're seeing interest in both the Marcellus and Utica, and we don't expect to see that enthusiasm dissipate anytime soon," said Steve Haffner, a Pittsburgh-based partner with PwC's energy practice. "While that interest hasn't translated to a dramatic increase in the volume and value of shale deals in the region, potential buyers are seeking the right opportunities to establish their footprint in the area – or to expand – and that includes both private equity and foreign buyers."

The most active shale plays for M&A with values greater than $50 million during the first quarter of 2013 include the Eagle Ford in Texas with five total transactions representing $5.1 billion, followed by the Marcellus Shale, the Utica Shale, and then the Bakken in North Dakota with one deal totaling $513 million.

"The first quarter saw a divergence in buyer-seller price expectations around gas assets, as natural gas prices bumped up from recent historical low levels," added Roberge. "These higher valuations for gas assets, combined with continued high valuations in the sweet spots of the liquid rich shale plays, were a major contributor to PE firms largely sitting out this quarter, but it's critically important for PE's and strategics alike to be ready  when  opportunity surfaces and prices are more favorable, as buyers will be lining up. Making sure they have the right strategies, integration plans, and controls in place will make for a better prepared buyer that maximizes the chances for success."

PwC notes that during the first quarter of 2013, master limited partnerships (MLP) were involved in eight transactions, representing more than 20 percent of total deal activity and continuing the trend of MLP involvement in deal transactions, as MLPs represented 20.6 percent of total deal activity in 2012.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

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Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

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Sefton Updates Tapia Canyon Activity in California

Sefton Resources announced an update on the permitting and drilling of the Hartje replacement water disposal well, oil production from California and the thermal stimulation report of the Tapia Canyon oil field.

All permits are now in place for the drilling of the new water disposal well Hartje #21 and a rig has been located that is available in March 2013.Preliminary oil production data (tank readings, before estimated 4 percent shrinkage) for California has been compiled for the month of January 2013 with 3,507 barrels of oil compared to 4,124 barrels actually produced for the month of December 2012. Production was restricted during January 2013 by Californian State mandated tank testing and repairs. The new Yule lease wells continue to make progress after acidization and steaming.Dr. Farouq Ali believes that work on the history match stage of the thermal simulation study will be completed soon. He has advised that he intends to complete this part of the study by the end of February 2013 and by that time expects to have begun the cyclical steaming matches and various steamflood scenarios.

Jim Ellerton, Chairman of the Board said:

"I am pleased to report that the new water disposal well at Tapia is now fully permitted. Water disposal has been the critical limiting factor in optimizing production at Tapia and the Company can now look to the benefits that upgraded water disposal facilities coupled with the progress that has been witnessed following the acidization and cyclic steaming of the Yule wells.

"Further progress has been made towards the completion of the thermal simulation study on Tapia which will allow the value of the Enhanced Oil Recovery (EOR) project at Sefton's 100 percent-owned Tapia Canyon oil field to be maximized in negotiations with third parties to scale up the size of this project to its ultimate potential."

The Company has completed the permitting for the drilling of the new water disposal well Hartje #21. A rig has been located that is available in March 2013 and negotiations on the drilling contract are proceeding. The drilling of this water disposal well will resolve the most critical oil production limiting factor at Tapia.

Preliminary oil production data (tank data) has been compiled for the month of January 2013. After a 4 percent shrinkage number is applied, tank data indicates an estimate of 3,367 barrels of oil produced or approximately 109 barrels of oil per day (bopd) compared with a final production figure of 133 bopd in December 2012. Production was restricted during January 2013 by tank testing and repairs that were required by new State of California regulations for operators with inspection overseen by the Californian Division of Oil, Gas & Geothermal Resources ("DOGGR").

The regulations required that tanks be emptied of liquids to conduct wall thickness measurements which have disrupted oil production during this process, as wells have been shut in for partial or complete day cycles. Tanks on the Hartje, Lackie/Snow, Yule and Eureka facilities were tested in January and this work has continued into the month of February with 3 tanks remaining to be tested and repaired.

The steam generator is now injecting steam into the wells on the Snow lease. Snow #3 well has just returned to production after steaming and although still producing at a 98 percent water cut due to steam injection it is encouraging that post steaming the well is averaging 200 barrels of gross fluid (water and oil) per day compared with 33 barrels of total gross fluid per day prior to steaming.

Dr. Farouq Ali believes that he will soon complete the history match stage of the thermal simulation study. The history match involves fine tuning of the model to ensure that the model can actively reflect the historical performance of the field since oil production began in the 1950's. Dr. Ali has advised that he intends to complete this part of the study by the end of February 2013 and by that time expects to have begun the cyclical steaming matches and various steamflood scenarios.

The thermal simulation study serves to optimize production and reserve development at Tapia Canyon. From the very beginning, the Board has been determined to get the best possible thermal stimulation report prepared by acknowledged experts in order that the value of Enhanced Oil Recovery (EOR) project at Tapia Canyon can be maximized in negotiations with third parties concerning the full development of this oil field.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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North America Oil, Gas Resources Main Focus of 2012 M&A Activity

Upstream oil and gas assets remained the focus of merger and acquisition (M&A) activity in 2012, with the total value of energy deals done last year rising to $321.5 billion from $300.6 billion in 2011, according to Deloitte's year-end 2012 report on M&A activity in the oil and gas sector.

Rosneft's $61.6 billion acquisition of BP-TNK drove buyers' focus on upstream assets, but excluding this deal, North American unconventional and deepwater oil and gas plays remained the focus of M&A activity in 2012. A few major transactions near the end of 2012 bumped total M&A deal value higher, but the number of overall deals completed declined from 698 to 576 in most segments except downstream.

National oil companies and other larger international buyers remained active in North America and other markets as they continue to expand their resource base, said John England, leader of Deloitte's U.S. Oil & Gas and vice chairman of Deloitte LLP, in the report. These companies found the North American market attractive in 2012 due to:

North America's political stability and mature investment environmentInvestment opportunities in well-known North American resource plays with predictive resultsAccess to technology and workforce expertise which has driven the exploration and production boom in unconventional and deepwater resources in North AmericaPotential continued growth that could to an export market for North American resources

Global upstream oil and gas activity grew 50 percent to $253.4 billion last year, compared with $167.9 billion in 2011, while the number of deals grew 11 percent from 518 to 461. The hunt by international companies for North and South American properties should continue as countries such as China and India address their growing energy demands and diversify their portfolios. Large integrated companies should also be active buyers as they look to the market for new properties to offset production declines that have been prevalent among the majority of supermajors.

While M&A activity in the upstream sector remained brisk last year, the oilfield services sector was quiet, partly due to the steadily declining U.S. rig count during 2012. M&A transactions totaled $17.9 billion, a 54 percent decline from 2011, and the number of deals also declined from 97 in 2011 to 57 in 2012.

Softening demand in the second half of the year also put pressure on margins and on public company stock prices, making companies less capable or interested in doing transactions. The shift by producers from dry gas to liquids also forced oilfield companies to relocate resources and services, creating inefficiencies and overcapacity in some areas and a struggle to reposition resources and labor to emerging liquids areas.

However, "2013 may be a year when M&A activity rebounds in the onshore oilfield services sector, as sellers become more realistic about pricing and consolidation," England commented.

Midstream M&A also slowed from the rapid 2011 pace, but activity remained at historically high levels, and continued to focus on transactions that will facilitate serving of the North American shale plays. Midstream M&A total value reached $35.6 billion in 2012, down from $84.5 billion in 2011.

"Growth in the midstream pipeline and processing infrastructure has not kept pace with growth in the unconventional resource plays, providing many opportunities for capital investment that we expect to lead to more midstream deal activity in 2013," England noted, adding that Deloitte believes that some bigger players could enter the market, some consolidation to take place, or a combination of both, if the midstream segment is going to continue supporting shale and tight oil activity in the United States.

Downstream M&A activity held steady, with the value of deals rising to $14.6 billion for 2012 from $11 billion in 2011. The downstream sector has been through a major reshuffling in the past two years, with the spinoff of downstream businesses of two large integrated oil companies and two significant refinery dispositions by BP. Independent companies now mainly dominate North America's refining industry after once being controlled by large integrated firms.

"U.S. refiners in general have seen their underlying business fundamentals greatly improve over the last two years, as a result of fundamental prospects and valuations being highly dependent upon geographic location and access to cheap crude and pipeline capacity," England noted.

Crude oil prices, which have settled into a stable range, set the stage for greater confidence around upstream oil investments. U.S. natural gas prices, which have traded at historic lows thanks to the U.S. shale gas exploration boom which has significantly increased supply, are not expected to rebound significantly in 2013, but deal activity may grow in the exploration and production and service areas.

"At some point the valuations in the natural gas area become so attractive that buyers with a long-term strategy could make a good deal of money," said Roger Ihne, principal with Deloitte Consulting LLP, in the report.

Thanks to technological advancements in drilling and production, the number of completions in North American fields has risen, and Deloitte expects to see improvements not only in cost effectiveness but in safety as well.

However, industry executives and other deal market participants should keep an eye on regulatory direction in the upcoming second term of the Obama administration, England noted. The oil and gas industry has been targeted by some groups in Washington looking for sources of new tax revenues, and whether they achieve the desired results could affect activity in the coming year.

"As the U.S. oil and gas industry and its activities become larger and more publicly visible across the multiple shale and tight oil basins, it is incumbent upon companies to be particularly diligent in following the evolving regulations and be sensitive to environmental concerns as these new plays are developed," England commented.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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North America Oil, Gas Resources Main Focus of 2012 M&A Activity

Upstream oil and gas assets remained the focus of merger and acquisition (M&A) activity in 2012, with the total value of energy deals done last year rising to $321.5 billion from $300.6 billion in 2011, according to Deloitte's year-end 2012 report on M&A activity in the oil and gas sector.

Rosneft's $61.6 billion acquisition of BP-TNK drove buyers' focus on upstream assets, but excluding this deal, North American unconventional and deepwater oil and gas plays remained the focus of M&A activity in 2012. A few major transactions near the end of 2012 bumped total M&A deal value higher, but the number of overall deals completed declined from 698 to 576 in most segments except downstream.

National oil companies and other larger international buyers remained active in North America and other markets as they continue to expand their resource base, said John England, leader of Deloitte's U.S. Oil & Gas and vice chairman of Deloitte LLP, in the report. These companies found the North American market attractive in 2012 due to:

North America's political stability and mature investment environmentInvestment opportunities in well-known North American resource plays with predictive resultsAccess to technology and workforce expertise which has driven the exploration and production boom in unconventional and deepwater resources in North AmericaPotential continued growth that could to an export market for North American resources

Global upstream oil and gas activity grew 50 percent to $253.4 billion last year, compared with $167.9 billion in 2011, while the number of deals grew 11 percent from 518 to 461. The hunt by international companies for North and South American properties should continue as countries such as China and India address their growing energy demands and diversify their portfolios. Large integrated companies should also be active buyers as they look to the market for new properties to offset production declines that have been prevalent among the majority of supermajors.

While M&A activity in the upstream sector remained brisk last year, the oilfield services sector was quiet, partly due to the steadily declining U.S. rig count during 2012. M&A transactions totaled $17.9 billion, a 54 percent decline from 2011, and the number of deals also declined from 97 in 2011 to 57 in 2012.

Softening demand in the second half of the year also put pressure on margins and on public company stock prices, making companies less capable or interested in doing transactions. The shift by producers from dry gas to liquids also forced oilfield companies to relocate resources and services, creating inefficiencies and overcapacity in some areas and a struggle to reposition resources and labor to emerging liquids areas.

However, "2013 may be a year when M&A activity rebounds in the onshore oilfield services sector, as sellers become more realistic about pricing and consolidation," England commented.

Midstream M&A also slowed from the rapid 2011 pace, but activity remained at historically high levels, and continued to focus on transactions that will facilitate serving of the North American shale plays. Midstream M&A total value reached $35.6 billion in 2012, down from $84.5 billion in 2011.

"Growth in the midstream pipeline and processing infrastructure has not kept pace with growth in the unconventional resource plays, providing many opportunities for capital investment that we expect to lead to more midstream deal activity in 2013," England noted, adding that Deloitte believes that some bigger players could enter the market, some consolidation to take place, or a combination of both, if the midstream segment is going to continue supporting shale and tight oil activity in the United States.

Downstream M&A activity held steady, with the value of deals rising to $14.6 billion for 2012 from $11 billion in 2011. The downstream sector has been through a major reshuffling in the past two years, with the spinoff of downstream businesses of two large integrated oil companies and two significant refinery dispositions by BP. Independent companies now mainly dominate North America's refining industry after once being controlled by large integrated firms.

"U.S. refiners in general have seen their underlying business fundamentals greatly improve over the last two years, as a result of fundamental prospects and valuations being highly dependent upon geographic location and access to cheap crude and pipeline capacity," England noted.

Crude oil prices, which have settled into a stable range, set the stage for greater confidence around upstream oil investments. U.S. natural gas prices, which have traded at historic lows thanks to the U.S. shale gas exploration boom which has significantly increased supply, are not expected to rebound significantly in 2013, but deal activity may grow in the exploration and production and service areas.

"At some point the valuations in the natural gas area become so attractive that buyers with a long-term strategy could make a good deal of money," said Roger Ihne, principal with Deloitte Consulting LLP, in the report.

Thanks to technological advancements in drilling and production, the number of completions in North American fields has risen, and Deloitte expects to see improvements not only in cost effectiveness but in safety as well.

However, industry executives and other deal market participants should keep an eye on regulatory direction in the upcoming second term of the Obama administration, England noted. The oil and gas industry has been targeted by some groups in Washington looking for sources of new tax revenues, and whether they achieve the desired results could affect activity in the coming year.

"As the U.S. oil and gas industry and its activities become larger and more publicly visible across the multiple shale and tight oil basins, it is incumbent upon companies to be particularly diligent in following the evolving regulations and be sensitive to environmental concerns as these new plays are developed," England commented.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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U.S. M&A Activity Hits 10-Year High in 4Q2012

Merger and acquisition (M&A) activity in the U.S. oil and gas industry hit a 10-year high during the fourth quarter of 2012 with 75 deals, according to PwC US. A number of factors drove this activity, including private equity (PE) interest, foreign buyers, shale plays, and companies looking to get deals done before the end of the year with the looming fiscal cliff and proposed tax changes. In fact, that flurry of fourth quarter activity pushed overall deal volume in 2012 to a ten-year high at 204 transactions (for deals valued at over $50 million), representing $146.2 billion – the second highest total deal value in 10 years.

During the final three months of 2012, total deal value reached $56.2 billion, marking the second highest level seen in 10 years (behind the $79.1 billion total deal value seen during the fourth quarter of 2011).

"M&A activity in the U.S. oil and gas sector was extremely robust in 2012, with the vast majority of that activity happening in the final three months of the year as many deals got pulled forward due to the uncertainty surrounding the fiscal cliff," said Rick Roberge, principal in PwC’s energy M&A practice. "This past year was a watershed moment for the industry, with private equity involvement reaching an all-time high, shale deal volume at a two-year high during the fourth quarter, and a jump in asset transactions as companies have shifted their focus to adding more profitable liquid rich shale plays to their portfolios.

"We expect to see a slight pause in M&A during the first part of 2013 as companies focus on the recent wave of deals announced, but believe 2013 will be another banner year for deals as the U.S. oil and gas industry is ripe for continued consolidation. In fact, our recent PwC Global CEO Survey found that energy CEOs are among the most confident on growth prospects for this year than any other industry."

Private equity deal activity in the oil and gas industry marked an all-time high in 2012 with 34 transactions (which represented $28.4 billion). In the fourth quarter of 2012, there were 11 financial sponsor-backed deals worth $6.9 billion, a slight drop from the 13 PE deals in the fourth quarter of 2011 that totaled $13.6 billion. Additionally, there were 170 strategic deals in all of 2012 that contributed $117.8 billion, compared to 163 strategic deals in 2011 with a total deal value of $136.5 billion. During the fourth quarter of 2012, there were 64 strategic deals, a 64 percent increase from the 39 deals during the same time period last year. Total deal value for strategics was $49.2 billion during the last three months of 2012, a decline from the $65.5 billion in the fourth quarter of 2011.

PwC noted that during 2012, master limited partnerships (MLPs) were involved in 42 transactions, representing more than 20 percent of total 2012 deal activity, continuing the trend of increased MLP involvement over the past two years (MLPs represented 15.6 percent of total deal activity in 2010 and 18.4 percent in 2011).

For deals valued at over $50 million, upstream deals accounted for 53 percent of activity in the fourth quarter of 2012 with 40 transactions, representing $38.0 billion, or 68 percent of total fourth quarter deal value. The number of oil deals within the upstream sector totaled 22, a significant difference compared to five gas deals in the quarter. There were 21 midstream deals that contributed $10.9 billion. Nine downstream deals during the fourth quarter of 2012 added $5.9 billion, while oilfield services contributed five deals worth $1.4 billion.

Asset transactions dominated total M&A deal volume during the fourth quarter of 2012 with 56 deals, a continuation of a trend that PwC noted during the third quarter of 2012, marking the highest volume of asset transactions in at least ten years. Total deal value for those asset transactions represented $27.2 billion, the second highest value in ten years. For all of 2012, there were 158 asset deals worth $89.3 billion.

Also marking a ten-year high, there were 19 corporate transactions (with values greater than $50 million). Those deals had a total deal value of $29.0 billion during the fourth quarter of 2012. For full year 2012, there were 46 corporate transactions that contributed $56.9 billion.

According to PwC, there were 27 deals with values greater than $50 million related to shale plays in the fourth quarter of 2012, totaling $16.3 billion, an increase from the 22 shale-related deals during the fourth quarter of 2011, although total deal value was flat. For all of 2012, there were 77 shale deals that contributed $51.7 billion, an increase of two deals when compared to full year 2011, but a drop from the $72.7 billion in shale deal value from 2011. Included in the shale deals for fourth quarter 2012 were two transactions from the Marcellus Shale with a total deal value of $685 million and one Utica Shale deal worth $372 million.

PwC also noted that the volume of upstream and midstream shale deals increased in the fourth quarter of 2012 when compared to the same quarter in 2011. There were 17 total shale deals in the upstream sector, accounting for $9.0 billion, which was one more deal when compared to Q4 2011, although deal value had decreased from $12.3 billion last year. Midstream shale-related deals totaled 10 for the fourth quarter of 2012, representing $7.3 billion, an increase from the six midstream deals worth $4.0 billion during the fourth quarter of 2011.

"Throughout 2012, we continued to see a fair amount of repositioning and realignment with companies around midstream assets in the Marcellus Shale and Utica Shale as they looked to build the infrastructure needed to transport the extracted oil and gas," said Steve Haffner, a Pittsburgh-based partner with PwC’s energy practice. "Given the disparity in commodity prices, we expect to see continued movement during the year from the Marcellus to the Utica, as the Utica is a more attractive play due to its higher liquid content."

The most active shale plays for M&A with values greater than $50 million during the fourth quarter of 2012 include the Bakken in North Dakota, which had seven deals with a total value of $4.1 billion, followed by the Eagle Ford in Texas with six deals representing $3.1 billion.

"As we look out at the deal landscape throughout 2013, we believe the fundamentals are in place for continued transactions, including the potential for some very large deals to get done,” added Roberge. “The combination of independents who still control the majority of resources and the majors who have strong balance sheets and financial muscle may result in consolidation, as the capital requirements to develop shale plays continues to grow. We also expect PE to remain active in new investments."

Foreign buyers announced nine deals in the fourth quarter of 2012, which contributed $3.2 billion, versus seven deals valued at $10.4 billion during the same period last year.

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U.S. M&A Activity Hits 10-Year High in 4Q2012

Merger and acquisition (M&A) activity in the U.S. oil and gas industry hit a 10-year high during the fourth quarter of 2012 with 75 deals, according to PwC US. A number of factors drove this activity, including private equity (PE) interest, foreign buyers, shale plays, and companies looking to get deals done before the end of the year with the looming fiscal cliff and proposed tax changes. In fact, that flurry of fourth quarter activity pushed overall deal volume in 2012 to a ten-year high at 204 transactions (for deals valued at over $50 million), representing $146.2 billion – the second highest total deal value in 10 years.

During the final three months of 2012, total deal value reached $56.2 billion, marking the second highest level seen in 10 years (behind the $79.1 billion total deal value seen during the fourth quarter of 2011).

"M&A activity in the U.S. oil and gas sector was extremely robust in 2012, with the vast majority of that activity happening in the final three months of the year as many deals got pulled forward due to the uncertainty surrounding the fiscal cliff," said Rick Roberge, principal in PwC’s energy M&A practice. "This past year was a watershed moment for the industry, with private equity involvement reaching an all-time high, shale deal volume at a two-year high during the fourth quarter, and a jump in asset transactions as companies have shifted their focus to adding more profitable liquid rich shale plays to their portfolios.

"We expect to see a slight pause in M&A during the first part of 2013 as companies focus on the recent wave of deals announced, but believe 2013 will be another banner year for deals as the U.S. oil and gas industry is ripe for continued consolidation. In fact, our recent PwC Global CEO Survey found that energy CEOs are among the most confident on growth prospects for this year than any other industry."

Private equity deal activity in the oil and gas industry marked an all-time high in 2012 with 34 transactions (which represented $28.4 billion). In the fourth quarter of 2012, there were 11 financial sponsor-backed deals worth $6.9 billion, a slight drop from the 13 PE deals in the fourth quarter of 2011 that totaled $13.6 billion. Additionally, there were 170 strategic deals in all of 2012 that contributed $117.8 billion, compared to 163 strategic deals in 2011 with a total deal value of $136.5 billion. During the fourth quarter of 2012, there were 64 strategic deals, a 64 percent increase from the 39 deals during the same time period last year. Total deal value for strategics was $49.2 billion during the last three months of 2012, a decline from the $65.5 billion in the fourth quarter of 2011.

PwC noted that during 2012, master limited partnerships (MLPs) were involved in 42 transactions, representing more than 20 percent of total 2012 deal activity, continuing the trend of increased MLP involvement over the past two years (MLPs represented 15.6 percent of total deal activity in 2010 and 18.4 percent in 2011).

For deals valued at over $50 million, upstream deals accounted for 53 percent of activity in the fourth quarter of 2012 with 40 transactions, representing $38.0 billion, or 68 percent of total fourth quarter deal value. The number of oil deals within the upstream sector totaled 22, a significant difference compared to five gas deals in the quarter. There were 21 midstream deals that contributed $10.9 billion. Nine downstream deals during the fourth quarter of 2012 added $5.9 billion, while oilfield services contributed five deals worth $1.4 billion.

Asset transactions dominated total M&A deal volume during the fourth quarter of 2012 with 56 deals, a continuation of a trend that PwC noted during the third quarter of 2012, marking the highest volume of asset transactions in at least ten years. Total deal value for those asset transactions represented $27.2 billion, the second highest value in ten years. For all of 2012, there were 158 asset deals worth $89.3 billion.

Also marking a ten-year high, there were 19 corporate transactions (with values greater than $50 million). Those deals had a total deal value of $29.0 billion during the fourth quarter of 2012. For full year 2012, there were 46 corporate transactions that contributed $56.9 billion.

According to PwC, there were 27 deals with values greater than $50 million related to shale plays in the fourth quarter of 2012, totaling $16.3 billion, an increase from the 22 shale-related deals during the fourth quarter of 2011, although total deal value was flat. For all of 2012, there were 77 shale deals that contributed $51.7 billion, an increase of two deals when compared to full year 2011, but a drop from the $72.7 billion in shale deal value from 2011. Included in the shale deals for fourth quarter 2012 were two transactions from the Marcellus Shale with a total deal value of $685 million and one Utica Shale deal worth $372 million.

PwC also noted that the volume of upstream and midstream shale deals increased in the fourth quarter of 2012 when compared to the same quarter in 2011. There were 17 total shale deals in the upstream sector, accounting for $9.0 billion, which was one more deal when compared to Q4 2011, although deal value had decreased from $12.3 billion last year. Midstream shale-related deals totaled 10 for the fourth quarter of 2012, representing $7.3 billion, an increase from the six midstream deals worth $4.0 billion during the fourth quarter of 2011.

"Throughout 2012, we continued to see a fair amount of repositioning and realignment with companies around midstream assets in the Marcellus Shale and Utica Shale as they looked to build the infrastructure needed to transport the extracted oil and gas," said Steve Haffner, a Pittsburgh-based partner with PwC’s energy practice. "Given the disparity in commodity prices, we expect to see continued movement during the year from the Marcellus to the Utica, as the Utica is a more attractive play due to its higher liquid content."

The most active shale plays for M&A with values greater than $50 million during the fourth quarter of 2012 include the Bakken in North Dakota, which had seven deals with a total value of $4.1 billion, followed by the Eagle Ford in Texas with six deals representing $3.1 billion.

"As we look out at the deal landscape throughout 2013, we believe the fundamentals are in place for continued transactions, including the potential for some very large deals to get done,” added Roberge. “The combination of independents who still control the majority of resources and the majors who have strong balance sheets and financial muscle may result in consolidation, as the capital requirements to develop shale plays continues to grow. We also expect PE to remain active in new investments."

Foreign buyers announced nine deals in the fourth quarter of 2012, which contributed $3.2 billion, versus seven deals valued at $10.4 billion during the same period last year.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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