•  
  •  
  •  
  •  
  •  
  • Untitled Document
    Untitled Document

    Drop in NGL pricing pushes 2Q12 deals further towards midstream sector

    PwC US

    Infrastructure Deals around shale plays reaches $15.8 billion

    Private equity interest continues at brisk pace

    PE and MLPs make up 95% of conventional gas deal values

    While mergers and acquisitions (M&A) deal value in the US oil and gas industry over the past two years had primarily been driven by shale transactions in the upstream sector, deals in the second quarter of 2012 evolved toward midstream deals, particularly gathering and processing targets, according to PwC US. Midstream deal value accounted for 55% of total deal value in the second quarter with $15.8 billion, an almost 200% increase when compared to the second quarter last year. Additionally, three of the five largest deals during the second quarter of this year were midstream deals.

    For the three month period ending June 30, 2012, total deal value for transactions greater than $50 million reached $28.5 billion compared to $23.1 billion during the same period last year. Deal volume declined slightly to 50 oil and gas deals from the 55 deals during the second quarter of 2011. Average deal size also increased in the second quarter of this year, jumping 35% to $569 million from $421 million during the same period last year, driven by seven ‘mega’ deals (deals with values of $1 billion or more). 

    On a sequential basis, deal volume in the second quarter of 2012 increased significantly from the 33 deals in the first quarter, with total deal value also rising from $25.6 billion.

    “The second quarter experienced a softening of oil prices and, combined with the continued lows of natural gas prices and the global economic uncertainty, many oil and gas companies started to pull back from new investments in the upstream sector,” said Rick Roberge, principal in PwC’s energy M&A practice. “However, dealmakers put their capital to work in the midstream sector where they focused on building out the infrastructure to transport, process and store the oil and natural gas extracted from shale plays they previously acquired. We believe that this infrastructure-related build-out will continue to be a focus for the remainder of 2012 and into 2013.”

    For deals valued at over $50 million, there were 14 midstream deals in the second quarter of 2012. Upstream deals made up 58% of activity with 29 transactions, but only accounted for $9.3 billion of total deal value. According to PwC, upstream deals skewed toward oil-focused targets instead of gas-focused ones, with 12 oil deals compared to four gas deals – a historical high over the last 10 quarters that was likely driven by the differences in commodity prices.

    In addition, four downstream deals contributed $2.2 billion in value, while oilfield services added three deals worth$1.2 billion.

    There were 13 corporate transactions with values greater than $50 million during the second quarter of 2012, with a total deal value of $17 billion, or 60% of total second quarter value. Thirty-seven asset deals contributed $11.4 billion during the same time period. Both the number and total deal value of asset transactions declined from 40 deals representing $12.4 billion in the second quarter of 2011.

    According to PwC, there were 16 deals with value greater than $50 million related to shale plays in the second quarter of 2012, totaling $7.5 billion of total deal value. Included in the shale-related deals in the second quarter of 2012 were two transactions involving the Marcellus Shale totaling $1.6 billion and one Utica Shale deal that contributed $194 million.

    “Deal activity in both the Marcellus Shale and Utica Shale continued to tail off as a result of the persistent low price of natural gas,” said Steve Haffner, a Pittsburgh-based partner with PwC’s energy practice. “Over the past few quarters, shale assets were supported by strong pricing of natural gas liquids, but in the second quarter the market saw a drop in NGL pricing, impacting deal activity even further. Now the focus is on the midstream sector.”

    For deals valued at over $50 million, the volume of financial sponsor-backed transactions doubled during the second quarter of 2012 to 10 deals when compared to the same period last year. Private equity deals represented $5.7 billion in total deal value. PwC also notes that during the first half of 2012, master limited partnerships (MLPs) and private equity acquirers accounted for approximately 95% of conventional natural gas deal value.

    “Private equity activity is expanding in all sectors of the energy industry as financial sponsors continue to look for entry points to position themselves to participate in the tremendous expected growth in the US energy space. They also have the ability to exercise the patience necessary to invest in the natural gas business at the bottom of the cycle – a luxury public companies do not have,” added Roberge. “They’ve also been active on the sell-side looking to monetize earlier investments, especially in the midstream and oilfield services space. Whether it’s financial sponsors exiting or corporates looking to divest certain non-core assets, sellers in this market need to be well-prepared and ready to provide deeper financial and operational details for a competitive buyer landscape that includes more private equity firms than ever.”

    Foreign buyers announced three deals in the second quarter of 2012, which contributed $438 million, versus 11 deals valued at $6.4 billion during the same period last year.

    PwC’s Oil & Gas M&A analysis is a quarterly report of announced US transactions with value greater than $50 million analyzed by PwC using transaction data from IHS Herold.

     

    Most Popular

    Related Articles

    Cross Country Pipeline Supply acquires Sideline Specialty Equipment

    07/07/2015 Cross Country Pipeline Supply Co. Inc., an equipment and supplies provider to the domestic oil and gas pipeline construction industry, has acquired Sideline Specialty Equipment. Through the ac...

    Freudenberg acquires BlueSky Process Solutions

    07/02/2015 The Freudenberg Oil & Gas Technologies Business Group has acquired the business of BlueSky Process Solutions Ltd., of Stoney Creek, Ontario, Canada, effective June 30. BlueSky is a designer of ...

    Shandong Offshore International acquires Northern Offshore

    06/30/2015 China’s Shandong Offshore International Co. Ltd. has acquired Bermuda-based Northern Offshore Ltd., which has offices in Houston. The cash transaction is valued at NOK 1.3 billion ($164.64 million)...

    European Commission clears merger between Dresser-Rand and Siemens

    06/30/2015

    The European Commission has cleared Dresser-Rand Group Inc.’s proposed merger with Siemens. All of the conditions regarding regulatory matters have now been satisfied.


    Williams rejects $48B buyout offer from Energy Transfer Equity

    06/22/2015 Williams Co. has rejected a $48 billion buyout offer from Energy Transfer Equity LP. Williams plans to explore strategic alternatives following receipt of Energy Transfer Equity’s unsolicited propo...

    Shell-BG $70B merger gains US clearance

    06/17/2015 Royal Dutch Shell plc says that its $70 billion merger with BG Group plc has cleared its first antitrust hurdle by receiving early termination of the US antitrust waiting period from the US Federal...

    More Oil & Gas Financial Articles

    Cross Country Pipeline Supply acquires Sideline Specialty Equipment

    Tue, Jul 7, 2015

    Cross Country Pipeline Supply Co. Inc., an equipment and supplies provider to the domestic oil and gas pipeline construction industry, has acquired Sideline Specialty Equipment. Through the acquisition of Sideline, Cross Country has entered the Canadian market.  

    Freudenberg acquires BlueSky Process Solutions

    Thu, Jul 2, 2015

    The Freudenberg Oil & Gas Technologies Business Group has acquired the business of BlueSky Process Solutions Ltd., of Stoney Creek, Ontario, Canada, effective June 30. BlueSky is a designer of differentiated seal products, specifically for the upstream oil and gas segment.

    Shandong Offshore International acquires Northern Offshore

    Tue, Jun 30, 2015

    China’s Shandong Offshore International Co. Ltd. has acquired Bermuda-based Northern Offshore Ltd., which has offices in Houston. The cash transaction is valued at NOK 1.3 billion ($164.64 million), and is expected to close during the first half of August.

    European Commission clears merger between Dresser-Rand and Siemens

    Tue, Jun 30, 2015

    The European Commission has cleared Dresser-Rand Group Inc.’s proposed merger with Siemens. All of the conditions regarding regulatory matters have now been satisfied.


    Williams rejects $48B buyout offer from Energy Transfer Equity

    Mon, Jun 22, 2015

    Williams Co. has rejected a $48 billion buyout offer from Energy Transfer Equity LP. Williams plans to explore strategic alternatives following receipt of Energy Transfer Equity’s unsolicited proposal to acquire Williams in an all-equity transaction at a stated per share price of $64.00. The proposal was also contingent on the termination of Williams’ pending acquisition of Williams Partners LP.

    OGFJ photo of the day


    Click to view slideshow

    Oil & Gas Jobs

    Search More Job Listings >>
    Subscribe to OGFJ