The third quarter proved to be a quiet period for global oil and gas merger and acquisition (M&A) transactions compared to the previous three months of this year, but 2014 continues on track for stronger spending than in 2013 on the strength of U.S. dealmaking, specifically because of the Permian Basin.
Global exploration and production transactions between July and September totaled $34.5 billion, about 30% lower than in 2Q2014, UK-based consultant Evaluate Energy Ltd. estimated. North American activity was higher for the fifth consecutive quarter. However, transactions outside of North America nearly dried up; U.S. and Canada dealmaking accounted for almost 86% of the total values.
"The rise in deals in North America could be attributable to various factors," said Evaluate. "Unconventional oil resource plays are still the hottest properties on the market, with the Permian Basin seeming to be the current center of highest demand.
"There are also many cases of companies with a diverse variety of assets trying to streamline their property holdings to give a more specific area of focus, and as a result many North American assets have been made available for purchase. This stands in stark contrast to a few years ago where companies looked to hoard as much shale and unconventional acreage as possible across every play they could find."
Natural gas assets also are becoming more marketable, as the "approaching reality" of North American liquefied natural gas exports comes into view, according to Evaluate.
The Permian during 3Q2014 made up almost half of the total deal values in the United States and just under one-third of total global values at around $11.2 billion.
Calgary-based Encana Corp. clinched the biggest Permian deal of the period and the biggest overall in agreeing to acquire Athlon Energy Inc. in an acquisition worth a total of about $7.1 billion (see Shale Daily, Sept. 29). The second biggest transaction was Whiting Petroleum Corp.'s $6 billion deal to buy Kodiak Oil & Gas Corp., which, when completed should form the largest Bakken Shale operator (see Shale Daily, July 14).
The No. 3 transaction was Breitburn Energy Partners' purchase of QR Energy LP's Permian assets. At No. 4 was another one by Encana, its spinoff of trust PrairieSky Royalty Ltd. through a secondary offering. The largest deal outside of North America at No. 5 was Murphy Oil Corp.'s plan to sell off its Malaysian assets for $2 billion (see Shale Daily, Oct. 1). Interestingly, Murphy is selling the properties to redeploy some cash back into the Eagle Ford Shale.
In total, Evaluate estimated that there were 10 big Permian-focused transactions during the third quarter. Among them were Diamondback Energy Inc.'s and RSP Permian Inc.'s separate agreements to acquire bigger positions in the Midland sub-basin. Parsley Energy Inc. made a couple of separate deals, including an asset deal with Cimarex Energy Co., while Callon Petroleum bought some acreage in Texas. Eagle Energy Trust sold its entire working interest to an unidentified buyer, and Kohlberg Kravis Roberts & Co. merged existing assets with Legend Production Holdings LLC to create Trinity River Energy LLC.