M&A Activity Increased In The Oil And Gas Market In Q4 2011

Wednesday 8 February 2012, Amsterdam

The report provides detailed information on M&As, equity/debt offerings, private equity (PE), venture financing and partnership transactions registered in the oil and gas industry in Q4 2011. The report offers detailed comparative data on the number of deals and deal values in the last five quarters segregated into deal types, segments, and geographies. Besides, the report provides information on the top PE, venture capital (VC), and advisory firms in the oil and gas industry.

M&A Activity Increased In The Oil And Gas Market In Q4 2011

M&As, which include change in ownership and control of companies, in the oil and gas industry recorded an increase in Q4 2011. The oil and gas industry registered an increase of 17% in the number of deals and 31% in deal value with 169 deals worth $70.2 billion in Q4 2011, as compared to 144 deals worth $53.4 billion in Q3 2011. Kinder Morgan’s agreement to acquire El Paso for $37.8 billion was the major deal that led a substantial increase in deal values in the midstream sector in Q4 2011. The transaction valued the midstream assets of El Paso at $31.8 billion and the upstream assets at $6 billion.

The industry registered eight high-value deals of over $1 billion in Q4 2011, which accounted for 80% of the total deal value in the quarter. North America accounted for nearly half of the M&A deals in the oil and gas industry with 78 deals in Q4 2011, up 8% over the previous quarter’s 72 deals. Asia-Pacific recorded an increase with 36 deals in Q4 2011, up 57% from 23 deals in Q3 2011.

M&As in the upstream and midstream sectors registered an increase in the number of deals with 75 and 34 deals respectively in Q4 2011, as compared to 53 and 20 deals respectively in Q3 2011.

According to Swati Singh, Lead Analyst, “M&A activity in the Oil & Gas industry rose in 2011 as compared to 2010 both in terms of deal volume and the total deal value. Oil and gas companies struck 657 M&A deals worth $278 billion, compared with 638 M&A deals worth $217 billion recorded in 2010. The top 15 M&A transactions accounted for 44% of the total deal value on 2011; the largest transactions included Kinder Morgan's acquisition of El Paso for $37.8 Billion and BHP Billiton acquisition of Petrohawk Energy for $15.1 Billion. With crude oil prices stabilizing above $95 a barrel, the positive trend that we have seen in the recent months is likely to continue into 2012 with Asian companies expected to be the major players in the M&A landscape. Major IOCs and Asian National Oil companies are expected to drive M&A investment in unconventional oil and gas sector to offset their output declines from mature assets and to secure energy supplies.”

New Investments Increased In The Oil and Gas Industry In Q4 2011

New investments in oil and gas companies, including financing through equity offerings, debt offerings, private equity and venture financing, registered a significant increase of 61% in deal value with $76.1 billion in Q4 2011, as compared to $47.3 billion in Q3 2011. The number of deals also registered a 45% increase from 258 in Q3 2011 to 375 in Q4 2011.

The majority of investments came from the debt market and reached $48.3 billion in Q4 2011, which accounted for 63% of new investments in the oil & gas industry. Global debt offerings, including public and private debt placements, registered a significant increase of 41% in the number of deals and 32% in deal value with 97 deals worth $48.3 billion in Q4 2011, as compared to 69 deals worth $36.5 billion in Q3 2011. Upstream and downstream sectors attracted new investments, which amounted to $32 billion and $12 billion respectively in Q4 2011. Capital raising, through debt offerings, by companies in Europe registered a significant increase in the number of deals and value, with 27 deals worth $21.8 billion in Q4 2011, as compared to 12 deals worth $12.4 billion in Q3 2011.

Global equity offerings, including initial public offerings (IPOs), secondary offerings, and private investment in public equities (PIPEs), registered an increase of 41% in the number of deals and 74% in deal value with 254 deals worth $18.8 billion in Q4 2011, as compared to 179 deals worth $10.8 billion in Q3 2011. Companies in North America recorded the majority of equity offering deals and deal value with 180 deals worth $10.7 billion in Q4 2011, followed by companies in Europe with 23 deals worth $2 billion.

The PE/VC deal value recorded a substantial increase from $1.6 billion in Q3 2011 to $11.5 billion in Q4 2011. The large difference in deal value was due to the high value deal of KKR, Crestview Partners, NGP Energy Capital and ITOCHU’s agreement to acquire Samson Investment for $7.2 billion recorded in Q4 2011. The number of PE/VC deals also registered an increase from 25 in Q3 2011 to 38 in Q4 2011.

Asset Transactions Increased In The Oil And Gas Industry In Q4 2011

Asset transactions in the oil & gas industry registered a significant increase of 91% in deal value from $11.7 billion in Q3 2011 to $22.4 billion in Q4 2011. On a year-on-year basis, the industry registered a decrease of 23% in deal value from $29.2 billion in Q4 2010 to $22.4 billion in Q4 2011. The number of asset transactions registered a 10% decrease from 300 in Q3 2011 to 269 in Q4 2011.

KazMunaiGas’s agreement to acquire a 10% interest in Karachaganak field for $3 billion; Total’s acquisition of 25% interest in oil and gas properties in Utica shale play from Chesapeake Exploration and EnerVest for $2.32 billion; Plains All American Pipeline’s agreement to acquire Canadian NGL & LPG business of BP for $1.67 billion; and Centrica’s agreement to acquire oil and gas assets in Norway North Sea from Statoil Petroleum for $1.63 billion were some of the high value deals registered in Q4 2011.

The average cost of production ($) per barrel of oil equivalent (boe) incurred by companies in acquiring assets and companies in the upstream sector registered a decrease from $88,473.6 in Q3 2011 to $76,670.7 in Q4 2011. In terms of 1P or proved reserves, the average implied deal value registered a decrease from $16.7 in Q3 2011 to $14.5 in Q4 2011. 2P or proved plus probable also recorded a decrease from $14 in Q3 2011 to $12.4 in Q4 2011.

The majority of the oil and gas companies are showing interest in buying new assets in the high potential, minimal exploratory risk unconventional shale plays, with some of the major deals involving Utica, Barnett and Bakken Shale assets in Q4 2011. The Industry recorded some of the major deals such as Total’s acquisition of 25% interest in oil and gas properties in Utica shale play from Chesapeake Exploration and EnerVest for $2.32 billion; EV Energy Partners and EnerVest’s acquisition of natural gas properties in Barnett shale from EnCana Oil & Gas for $860m; Kodiak Oil & Gas’s acquisition of another 50,000 net Bakken acres in North Dakota for $638m; and Mercuria Energy’s agreement to sell interests in oil and gas properties in Bakken, North Dakota for $354m.

According to Swati Singh, Lead Analyst, “Unconventional assets transaction dominated the assets market in 2011. Super major energy companies and NOCs dominated the asset transaction market in 2011. Unconventional oil and gas resources will continue to dominate oil and gas M&A activities and companies focus will be more towards liquid rich shale gas plays (Eagle Ford, Marcellus) and oil shale plays such as Bakken. Frontier deepwater areas such as Ghana, Israel and Mozambique will see some assets transaction in coming years especially from supermajors with deeper pockets and better access to technological experience.”

Capital Raising Through Equity and Debt Offerings Increased In Q4 2011

Capital raising, through the issuance of debt instruments, in the oil and gas industry recorded an increase of 41% in the number of deals and 32% in deal value with 97 deals worth $48.3 billion in Q4 2011, as compared to 69 deals $36.5 billion in Q3 2011. In particular, capital raising through private debt placements recorded a substantial increase in deal value from $4.7 billion in Q3 2011 to $17.5 billion in Q4 2011. The large difference in deal value was due to more than 11 high value deals (greater than $500m each), which contributed $12.4 billon to total deal value in Q4 2011.

The raising of capital, through equity offerings, reached the highest level since Q4 2010. The oil and gas industry recorded an increase in the number of deals and deal value with 254 deals worth $18.8 billion in Q4 2011, as compared to 179 deals worth $10.8 billion in Q3 2011, indicating an increase of 41% in the number of deals and 74% in deal value.

Private investment in public equity (PIPE) deals recorded a significant increase of 50% in the number of deals and 335% in deal value with 162 deals worth $7.4 billion in Q4 2011, as compared to 108 deals worth $1.7 billion in Q3 2011. Secondary offerings also recorded an increase of 48% in the number of deals and 98% in deal value with 80 deals worth $9.9 billion in Q4 2011, as compared to 54 deals worth $5 billion in Q3 2011.

Deals Increased In North America, Europe And Asia-Pacific In Q4 2011

All the regions recorded an increase in the deal activity in Q4 2011, as compared to Q3 2011. North America, Europe and Asia-Pacific recorded 515, 145 and 132 deals in Q4 2011, as compared to 459, 102 and 110 deals respectively in Q3 2011.

Deal values increased sharply in North America from $74 billion in Q3 2011 to $112.5 billion in Q4 2011. In North America, Kinder Morgan’s agreement to acquire El Paso for $37.8 billion; KKR, Crestview Partners, NGP Energy Capital and ITOCHU’s agreement to acquire Samson Investment for $7.2 billion; Complete Production Services’s agreement to merge with Superior Energy Services, values at $6.2 billion; and Statoil’s agreement to acquire Brigham Exploration for $4.7 billion were some of the high-value deals that raised the deal value in Q4 2011.

Asia-Pacific also recorded a significant increase of 69% in deal value with $9.8 billion in Q4 2011, as compared to $5.8 billion in Q3 2011. The significant difference in deal value was due to five high-value deals ranging between $500m to $3,000m, which contributed $6 billion to the total deal value in Q4 2011.