Absence of mega deals contributes to a dip in overall M&A value
HOUSTON, TX, October 31, 2013 – Foreign buyers and private equity (PE) players returned to the deals table as buyers of energy assets during the third quarter of 2013, helping drive the bulk of merger and acquisition (M&A) activity in the sector, according to PwC US. While divestiture activity contributed 36 total transactions, representing 84 percent of total deal volume, a significant decline in midstream M&A activity coupled with a lack of mega deals, resulted in a decline in deal value for the third quarter of 2013 compared to the same time last year.
For the three month period ended September 3o, 2013, there were a total of 43 oil and gas deals with values greater than $50 million, accounting for $16.4 billion, a slight decrease from the 45 deals worth $37.6 billion in the third quarter of 2012. On a sequential basis, deal volume in the third quarter dropped by nine percent compared to the second quarter of 2013, with deal value falling by 46 percent during the same time period. Divestiture deals accounted for $13.9 billion in total deal value.
“After a brief pause in the second quarter, foreign buyers and PE players came back to the deal table in the third quarter looking for attractive assets to add to their portfolios,” said Doug Meier, PwC’s US energy sector deals leader. “Divestitures continue to drive deal activity. 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. While deal value declined, activity remains robust, including in the shale plays and with master limited partnerships (MLPs) - and PwC expects that to continue through the remainder of the year.”
Foreign buyers announced nine deals in the third quarter of 2013, which contributed $2.8 billion or 17 percent of total deal value, versus four deals valued at $4.0 billion during the same period last year. On a sequential basis, the number of total deals increased 800 percent from just one foreign deal.
For deals valued at over $50 million in the third quarter, upstream deals accounted for 26 transactions, representing 61 percent of total deal volume totaling $11.2 billion. Additionally, there were four midstream deals, accounting for nine percent of total deal volume in the quarter worth a total of $1.3 billion. There were 10 oilfield services deals worth $3.0 billion, and three downstream deals added $886 million.
Shale deals were also a major driver of deal activity in the third quarter, as 17 shale deals contributed $5.4 billion, or 33 percent of total deal value. In the upstream sector, shale deals represented 15 transactions and accounted for $5.0 billion, while the midstream sector saw no shale deal activity in the third quarter of 2013.
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.
Financial investors’ deal activity returned in the oil and gas industry with six total transactions, representing $4.9 billion, or 30 percent of total deal value during the third quarter of 2013, compared to four deals, accounting for $1.5 billion, or five percent of total deal value in the second quarter of 2013.
“Financial investors continue to focus on exploration and production (E&P) opportunities but stepped into three oilfield service transactions in the third quarter,” added Rob McCeney, PwC’s US energy private equity deals leader. “Financial investors also accounted for one mega E&P transaction in the third quarter and continue to seek orphan businesses from corporate sellers.”
PwC notes that in the third quarter of 2013, MLPs were involved in 11 transactions, representing 26 percent of total deal activity. Overall, MLPs have generated 34 percent of total deal activity for the first three quarters of 2013. Of those 11 deals, four were upstream MLPs, or 36 percent of total MLP activity in the third quarter.
“MLPs, including those focused on the upstream space, are continuing to have a strong presence in the deal market – and PwC expects this to continue. MLPs use deals to grow distributions to unit holders, and they’re taking advantage of the attractive debt and equity markets to finance these deals,” concluded Meier.
PwC’s Oil & Gas M&A analysis is a quarterly report of announced U.S. transactions with value greater than $50 million analyzed by PwC using transaction data from IHS Herold.
PwC’s Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from over 1,500 deal professionals in 35 cities in the U.S. and over 13,400 deal professionals across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals.
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