Oil and gas deal values

According to PwC US, last year, mergers and acquisitions in the oil and gas industry in the US hit the year highs in terms of deal value and volume. The year was primarily driven by a significant level of mega deals, a trend that began earlier in 2014 and continued throughout the fourth quarter. In total, there were 49 mega deals worth approximately US$266.1 billion, compared to 24 deals worth US$71 billion in 2013.

Q4

During the final quarter of lat year, there were a total of 57 oil and gas deals accounting for US$128.7 billion, compared to 56 deals worth US$43 billion in the same period for 2013, a 200% growth in total deal value. Mega deals also represented 91% of total deal value in the fourth quarter of last year. Also, in 2014, there were 252 deals worth US$321.5 billion, an increase from the 187 deals worth US$117.2 billion in 2013.

Doug Meier, PwC’s US Energy Sector Deals Leader said, “while 2014 was a very strong year for oil and gas deal activity, we saw a steady decline in November and December as the drop in oil prices accelerated, contributing to a marked shift in deal sentiment from playing offence to playing defence as companies focused on maintaining liquidity. That downward trajectory in oil prices, coupled with the impact of leverage, drove a number of deals related to corporate restructuring and portfolio right sizing activities. In today’s low price environment, the effects of debt could drive additional deal activity as leveraged companies look to strengthen their balance sheets by focusing on cash flow optimisation and operational efficiencies. PwC’s Fit for US$50 program assists senior management to develop programs that can enable them to withstand the current price environment and help create a platform for profitable growth as commodity prices recover.”

For deals valued at over US$50 million, corporate transactions represented 16 deals totalling US$103.7 billion in the last quarter of 2014. For the full year, there were 59 corporate transactions that contributed US$227.5 billion. Asset transactions continued to dominate total M&A deal volume during the final quarter, with 41 deals representing 72% of total deal volume. Deal value for asset transactions reached US$25 billion, accounting for 19% of total deal value for the final quarter. For all of 2014, there were 193 asset deals worth US$94 billion.

PwC has also noted that during the final quarter of last year, there were 15 mega deals representing US$117.5 billion, compared to eight worth US$26.4 billion during the same period in 2013. In all of 2014, there were 49 mega deals worth US$266.1 billion, accounting for 83% of total deal value.

When it came to foreign investors, they continued to show interest in the US as both deal value and volume were at 10 year highs, contributing 56 deals worth US$71.2 billion last year. In the final quarter, foreign buyers announced 15 deals, accounting for US$25.4 billion in value, a 25% increase in deal volume and a 426% increase in deal value compared to the same period in 2013. Overall deal volume and value for foreign investors last year increased 75% and 468%, respectively compared to the previous year.

Up to mid to down stream

During Q4 of last year, there were 19 midstream deals, contributing US$53 billion in value, a 111% growth in deal volume and a 276% growth in deal value compared to the same period in 2013. Upstream deals accounted for 25 transactions representing US$32.5 billion. The total number of downstream deals decreased to six, while total deal value increased to US$7 billion compared to nine deals worth US$4.2 billion during the same period in 2013. The number of oilfield services deals remained the same at seven, while total deal value increased 619% to US$36 billion, a 10 year high, compared to US$5 billion in the fourth quarter of 2013.

Shale

PwC has said that there were 24 deals with values greater than US$50 million related to shale plays in Q4 of last year, totalling US$57 billion. This represents a 139% increase in total deal value compared to the fourth quarter of 2013. For all of last year, there were 107 total shale deals that contributed US$110.3 billion, a 107% growth in deal value when compared to all of 2013.

In the upstream sector, shale deals represented 19 transactions and accounted for US$14.9 billion, of 76% of total upstream deal volume in Q4 2014. There were five midstream shale related deals in the same period, accounting for US$42.1 billion, or a 230% increase in deal value when compared to Q4 2013. John Brady, Houston based Partner with PwC’s energy practice said, “overall 2014 shale deal value and volume surpassed 2013 highlighting the continued interest from investors in US shale plays, especially in the upstream space, which contributed 79% of total shale deal activity. However, a sustained low oil price environment is driving an intense focus on returns and the deployment of assets to the most efficient shale plays.”

The most active shale plays for M&A with values over US$50 million during Q4 of last year include the Bakken and Permian, which each had four deals worth US$3.1 billion and US$2.4 billion respectively. The Marcellus Sale contributed three deals worth US$5.7 billion. The Eagle Ford in Texas also contributed three deals worth US$484 billion, while Niobrara and Haynesville each generated one.

Conclusions

During 2014, master limited partnership were involved in 48 transactions, representing approximately 19% of total 2014 deal activity, consistent with recent historical levels.

Although financial investor deal activity dropped, they continued to show interest in the oil and gas industry with four transactions, accounting for US$2 billion during Q4 2014, compared to nine deals worth US$10 billion during the same time in 2013.

Rob McCeney, PwC US Energy & Infrastructure Deals Partner commented, “in the second half of 2014, we saw financial investors remain active in assessing deal activity across the value chain. If the price of oil continues to drop or remains at its current levels for a sustained period, we may see financial investors look to actively manage portfolio investments and search for new opportunities with distressed assets.”


Edited from press release by Claira Lloyd

Published on 29/01/2015


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