Table 4 United States E&P Mergers & Acquisitions Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013# of Deals 80 70 105 60 71Deal Value (US$MM) $11,439 $19,626 $37,461 $13,211 $7,920
Source: PLS Derrick M&A Database. Only include deals with values disclosed.
According to Lidsky, "In the US, no deal breached the $1 billion mark. An interesting dynamic in Q2 is that 52% of the deal value went largely to producing assets -- as opposed to corporate takeovers or early-stage development projects. Also, furthering an entrenched theme of the recent markets, the two largest deals in the quarter were bought by publicly traded MLPs, reinforcing the buying strength of this sector. The other buying strength in the US, primarily Asian companies, however, did not show up in Q2. We view this as a pause, not a departure from their strong demand for North American assets.
A highlight in Q2 was the closing of Freeport McMoRan Copper & Gold's acquisitions for $19 billion of both Plains E&P and McMoRan Exploration. The deals are the largest since FCX acquired Phelps Dodge for $26 billion in 2007. FCX is now solidly positioned as a premier US-based natural resource company, being the world's largest publicly traded copper producer plus high-quality oil and gas assets with strong cash flows and re-investment opportunities.
In the MLP sector, Breitburn Energy Partners paid $890 million in an asset deal, purchased from Whiting Petroleum, representing the largest US deal in Q2. The assets, primarily located in Texas Co., Oklahoma, are largely EOR projects, nearly 100% oil, and are expected to have little to no decline in production over the next ten years. The second largest deal is Atlas Resource Partners' $733 million purchase of CBM assets from EP Energy. In contrast to Breitburn's deal, these assets are 100% gas yet also exhibit low production declines.
Regarding upstream valuations in the US, current multiples for PDP-weighted assets continue to rise. For oil assets the multiples are $120,000 per bopd or $22.50 per proved bbl (average R/P = 16 years) range. For gas, the multiples are $5,800 per Mcfpd and $1.75 per proved Mcf (average R/P = 10 years).
At June 30, the inventory of deals in play continues to rise, reaching $133 billion compared to $116 billion on March 31 and $85 billion on December 31.
Table 5 Q2 2013 Announced Deals in Play > $1 BillionDate Sellers Country Comment06/21/13 Shell Nigeria Reviewing sale of select onshore leases06/18/13 Talisman United States Reported shopping select Eagle Ford assets06/04/13 Penn West Canada Reviewing all strategic options06/03/13 Rosneft Russia Reported non-core assets sale up to $15 billion05/23/13 Occidental Multiple Reported selling Middle East assets05/20/13 FCX United States Planning $1.5 billion of assets sales05/09/13 Apache Multiple Plans $4 billion of sales by YE 2013
Source: PLS Derrick M&A Database
The United States has the largest inventory of deals on the market with an estimated $37 billion, followed by Canada with $17 billion and Brazil and Russia, each with $15 billion.
New deals in play include Apache increasing a sales target of non-core assets to $4 billion before YE 2013 and FCX targeting $1.5 billion in sales following its recently completed acquisitions of PXP and MMR. Talisman is also reportedly investigating a potential sale of its Eagle Ford assets covering over 74,000 net acres. In Canada, Penn West Petroleum, after a CEO change, is exploring all strategic alternatives and in Africa, Shell recently announced intent to optimize its Nigerian portfolio.
PLS Inc. and Derrick Petroleum services are partners in providing U.S., Canadian and International clients leading Global and U.S. M&A and E&P databases and services. These databases now cover the upstream, midstream, downstream and OFS sectors and are maintained 24/7 by a team of analysts and are accessible via the web.
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