Global Upstream Oil and Gas M&A Activity Surges to $61 Billion Driven by Continued Scramble for Permian Assets and International Divestitures by Majors, Per 1Derrick

NEW YORK--()--Q1 2017 global upstream oil and gas M&A transaction value was $61 billion, the strongest first quarter in the past ten years and almost half the $130 billion in 2016, according to oil and gas information provider 1Derrick. US M&A deal activity for the quarter remained strong at $23 billion, at par with the prior two quarters. The $23 billion included 20 deals above $100 million, 5 of which were over $1 billion.

“Permian deals continued to dominate the US M&A market, reaching a new quarterly record at $17 billion in deal value. Buyers were clearly scrambling to get their hands on what they could in the best tight oil play in the world before all opportunities got taken up”

Fourteen of the top twenty US deals were transacted in the Permian Basin, including the three largest. ExxonMobil acquired Delaware Basin assets in New Mexico from the Bass brothers for $5.6 billion, Noble Energy announced the $3.2 billion purchase of Delaware Basin focused Clayton Williams, and Parsley Energy acquired $2.8 billion in acreage in Midland Basin from private equity (PE) backed Double Eagle Energy. For deals valued over $100 million in Permian, 9 were in Delaware Basin versus 5 in Midland Basin.

The metrics for undeveloped acreage (adjusted for the value of production) in the Delaware Basin touched a high of $35,000/Acre in Marathon’s $700 million acquisition of Black Mountain’s acreage. The acreage metric for deals focused on Reeves county ranged $28,000 – $32,000 per Acre during the quarter. Midland basin acreage saw a high of $38,000/Acre in the Parsley-Double Eagle deal. The acreage metrics were admittedly high, but did not cross the peaks of $46,000/Acre in the RSP Permian-Silver Hill deal ($2.4 billion, Oct-2016) in the Delaware Basin and $58,000/Acre in the QEP-RK Petroleum deal ($600 million, Jun-2016) in the Midland basin.

PE backed companies were involved in half of the US top 20 deals, monetizing assets in the Permian and buying into the Eagle Ford Shale. Significant PE divestitures include Post Oak Energy Capital exiting Double Eagle and BC Operating; Riverstone Holdings exiting Carrier Energy and Trail Ridge Energy Partners II. On the buy side, Blackstone together with Sanchez, KKR backed Venado and Warburg Pincus backed Hawkwood Energy bought into Eagle Ford assets.

“Permian deals continued to dominate the US M&A market, reaching a new quarterly record at $17 billion in deal value. Buyers were clearly scrambling to get their hands on what they could in the best tight oil play in the world before all opportunities got taken up” commented Ajit Thomas, Managing Director, 1Derrick.

Outside the US, Canadian transactions accounted for $25 billion, or 65%, of the $39 billion in international activity, driven by two mega oil sands transactions. ConocoPhillips divested oil sands and Deep Basin gas assets to Cenovus for $13.3 billion and Shell sold bitumen projects to Canadian Natural Resources for $8.5 billion. Three North Sea transactions were among the top ten deals, including Shell’s $3 billion sale of UK properties to Chrysaor, backed by Harbour and EIG Global, and ExxonMobil’s $ 1 billion divestment of operated Norwegian Continental Shelf fields to HitecVision backed Point Resources.

“Private Equity became active. Internationally deals crossed the finishing line with transaction structures that included payments contingent on milestones and oil prices and kept some decommissioning liabilities with the sellers.” Said Mangesh Hirve, COO of 1Derrick.

Other significant transactions were in Africa. ExxonMobil acquired 25% working interest in Area-4, Mozambique from Eni and Shell divested Gabon assets to Carlyle Group backed Assala Energy. Tullow divested interests in Lake Albert project, Uganda to China’s CNOOC and French Major Total.

1Derrick/Derrick Petroleum Services (www.1derrick.com) is an independent oil and gas research firm with offices in Houston, New York, London, Singapore and Bangalore. For more information on its industry leading databases and reports on M&A, business development strategy, new ventures, and exploration, please contact Ajit Thomas at Ajit.Thomas@1Derrick.com or 1.646.284.8661.

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Release Summary

Global Upstream Oil and Gas M&A Activity Surges to $61 Billion driven by continued scramble for Permian assets and International divestitures by Majors Private Equity became active