A NEW report has found that US mergers and acqusitions activity in the oil and gas sector continues to run at very high rates on the back of the current industry decline.
Whie the Q3 2016 figure of US$24.1 billion of new upstream oil and gas M&A deals fell just short of the US$26.5 billion spend in Q2 2016, it was still a massive increase on the Q3 2015 spend of US$17.7 billion spend, according to data from Evaluate Energy.
Tehe study found that the Permian basin, economically one of the best in the United States due to its multi-stacked pay zones, attracted 34% of the total spend during the quarter, with 10 of the deals in the basin this quarter being agreed for over US$100 million.
Another high impace shale area, the Marcellus gas play, attracted the largest deal of the quarter when Rice Energy Inc. acquired Vantage Energy LLC for US$2.8 billion.
On a side note, Vantage Energy’s September 2016 issue of a prospectus as it sought to go public on the New York Stock Exchange would have been the first IPO for an E&P company in the United States for over two years. The Rice Energy offer gave Vantage an option to forego taking the risk of testing the appetite of the investing community in regards to the US oil patch, which was promptly accepted. Evaluate Energy noted that within 24 hours of the deal being announced, Rice Energy’s share price had dropped by eight per cent, indicating that Rice valued the assets more than investors and that Vantage made a good choice by accepting the offer over going public.
In parallel with the largest deal in Q2 2016, which saw Range Resources Corp. acquire Memorial Resource Development Corp. for around US$4.4 billion, Vantage Energy is almost purely concerned with the production of natural gas in the US – 95% of Vantage’s production is gas. However, while Memorial Resource Development Corp. was a pure-play company operating in Louisiana, Vantage has three operating areas in the Marcellus, Utica and Barnett shale plays.
Meanwhile, EOG Resources Inc. bolstered its positions in the Delaware and Powder River basins with a US$2.5 billion acquisition of private company, Yates Petroleum Corp. EOG funded 94% of the deal consideration with stock, with the remainder taken up via the assumption of debt and a small cash payment. In total, the deal will add 1.6 million acres to EOG’s inventory, which currently contains just 44 million boe of proved developed reserves.
EOG believes that 1,740 potential drilling locations will contain a further 1.6 billion boe of reserves.
High profile independent Anadarko Petroleum Corp. more than doubled its ownership in the Lucius facility in the Gulf of Mexico to 49%, paying US$2 billion in cash and a potential US$150 million in future payments from Freeport-McMoRan Inc.
Canadian M&A quieter
Evaluate Energy said the third quarter was quieter on the M&A front aside from a huge C$1.5 billion deal between Seven Generations Energy and Paramount Resources.
Evaluate said deal activity in Canada was limited to relatively low value deals in Q3 2016. The only other deal that was over C$100 million in value saw ARC Resources Ltd acquire Cardium assets in west-central Alberta for C$114 million from an undisclosed party. The assets being acquired produced 3,000 boe/d at the time of the deal being announced, roughly 85% of which is made up of light oil. The $114 million outlay represents a C$38,000 cost per flowing barrel.
Evaluate said Q3 also saw a number of relatively smaller producers being acquired.
The largest of these involved Alberta Oilsands Inc. with the company agreeing to acquire Marquee Energy Ltd for around C$56 million in order to form a new combined company focused on the Michichi area of Alberta. InPLay Oil Corp., a private Alberta-based company, announced its own corporate transaction this quarter, a C$25 million deal to acquire Anderson Energy Inc. and was also involved in a deal with Bellatrix Exploration Ltd to acquire some Cardium assets for C$36 million.
Evaluate Energy said the second largest deal of the quarter was outside of North America; Norway’s Statoil agreed to acquire a 66% interest in the Carcara pre-salt oil discovery offshore Brazil from Petrobras for US$2.5 billion. Statoil is already a major player in Brazil with an ownership in 12 exploration licenses and a 60% interest in the 100,000 b/d Peregrino field. This latest acquisition shows Statoil’s strong commitment to the Brazilian oil sector, as the Carcara field still requires lengthy and expensive development before it starts to pay out.
Evaluate said the deal was part of Petrobras’ plan to divest assets with a goal of raising US$15.1 billion in 2015 and 2016 via asset sales. This deal, along with a US$5.2 billion disposal of Brazilian midstream gas assets during Q2 2016, brings Petrobras US$7.7 billion closer to this goal.