Upstream M&A activity peaks in two years

The recovery in the oil and gas sector extends to what had been an extremely anemic M&A market.

Data analytics firm Enverus, reporting on second-quarter activity, found activity had peaked in two years with 40 transactions totaling $ 33 billion. Seven of those deals were worth more than $ 1 billion each, a level not seen since Occidental Petroleum bought Anadarko.

“Rising commodity prices are helping mergers and acquisitions,” Andrew Dittmar, senior mergers and acquisitions analyst at Enverus, told Reporter-Telegram in a telephone interview.

“With three extremely active quarters out of the last four, more than $ 85 billion has been announced in upstream mergers and acquisitions in the past 12 months,” said Dittmar.

The new trend is for public companies to buy privately funded companies, but in stocks rather than cash, he said. This is a reversal from last year, when state-owned companies bought other state-owned companies, he said, citing the purchase of Parsley Energy by Pioneer Natural Resources as an example.


“It’s not a bad deal for the seller to take stock,” he said. It allows a funder to exit the business while the SOE acquires assets. If the shares rise with interest in the public company, the seller gets more profit, he said.

State-owned companies making the purchases today are less focused on cost savings and synergies and more on building up inventory, Dittmar said. This indicates that operators have positive expectations for oil demand in the coming years.

“It won’t be like good weather, but there will be good demand,” he said.

The high prices per acre also passed during the heyday of the “Permiania”. Rather than deals averaging $ 45,000 to $ 55,000 per acre or more, Dittmar said prices range from $ 8,000 to $ 12,000 per acre in the Midland and Delaware basins. Pioneer’s recent deal to buy DoublePoint Energy, backed by PE, was an outlier, he said, with a net cost per acre valued at $ 67,000.

“Pioneer liked DoublePoint, saw a benefit and was willing to pay,” he said.

Midland’s Colgate Energy Partners III also made the news about the merger in June, first agreeing to acquire the majority of the assets held by Luxe Energy in an all-equity transaction. These assets include 22,000 net acres adjacent to Colgate’s current position in Reeves and Ward counties and 5,000 acres of gross area for future development. Then, a week later, Colgate announced the purchase of 25,000 net acres in Reeves and Ward counties from Occidental Petroleum for $ 508 million.

Vencer Energy, the US upstream oil and gas subsidiary of Dutch energy and commodity trading giant Vitol entered the Permian with the acquisition of the assets of Hunt Oil Company in the Midland Basin, approximately 44,000 net acres in five counties.

Unused interests also get action. Northern Oil and Gas, like Vencer, entered the Permian with the acquisition of direct undeveloped interests in Lea County, New Mexico.

As long as commodity prices remain high, Dittmar expects merger activity to remain strong, although he said there is unlikely to be another $ 30 billion quarter. or more transactions this year.

“There are many opportunities for further acquisitions of private E&P or non-core assets,” said Dittmar. “The story of SOE consolidation is also not over, although its pace has slowed.”


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