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PwC US: Divestitures driving US oil and gas M&A activity

PwC US

PwC US reports that 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.

While divestiture activity contributed 36 total transactions, representing 84% 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 Sept. 30, 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 9% compared to the second quarter of 2013, with deal value falling by 46% during the same time period. Divestiture deals accounted for $13.9 billion in total deal value.

Foreign buyers announced nine deals in the third quarter of 2013, which contributed $2.8 billion or 17% of total deal value, versus four deals valued at $4 billion during the same period last year. On a sequential basis, the number of total deals increased 800% from just one foreign deal.

For deals valued at over $50 million in the third quarter, upstream deals accounted for 26 transactions, representing 61% of total deal volume totaling $11.2 billion. Additionally, there were four midstream deals, accounting for 9% of total deal volume in the quarter worth a total of $1.3 billion. There were 10 oilfield services deals worth $3 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% of total deal value. In the upstream sector, shale deals represented 15 transactions and accounted for $5 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% of total deal value during the third quarter of 2013, compared to four deals, accounting for $1.5 billion, or 5% of total deal value in the second quarter of 2013.

PwC noted that, in the third quarter of 2013, MLPs were involved in 11 transactions, representing 26% of total deal activity. Overall, MLPs have generated 34% of total deal activity for the first three quarters of 2013. Of those 11 deals, four were upstream MLPs, or 36% of total MLP activity in the third quarter.

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