After experiencing a lull in the first half of this year, mergers and acquisitions (M&A) throughout the energy sector are going to pick up dramatically to the end of 2018, according to Austin, TX-based Drillinginfo.
The energy data and forecasting firm sees $50 billion of U.S. M&A activity in play as sellers retrench to pure-play status. Buyers are likely to include majors and super independents, along with various private equity, European, Asian and Middle East entrants.
M&A generated $21.1 million in 1Q2017 and has averaged $17.7 billion quarterly since 2014 according to the firm. M&A slowed to $8.7 billion in 2Q2018, it said.
"During the pause, the previously white hot Permian Basin market stalled at just $801 million in deals, the lowest quarter since $437 million in 2Q2015," Drillinginfo researchers said.
The firm pointed to the $18 billion Permian "land grab" that occurred early last year as the previous M&A high point, followed by public oil and gas companies retrenchment to single basin and core area emphasis. Exploration and production (E&P) companies are shedding noncore assets, which Drillinginfo now tallies at more than $50 billion of deals in play.
Predicting that the risk of sub-$50/bbl oil is over, Drillinginfo senior director Brian Lidsky said he expects the rest of 2018 to be profoundly different. "We expect buyers to run the gamut from private equity, where since 2017 more than 70 teams have been provided with more than $15 billion of committed capital."
The analysis found that the wave of bankruptcies that followed the oil price downturn in late 2014 is not necessarily over with Appalachia-focused Rex Energy the latest casualty. It also estimated there are $165 billion in energy transactions across the value chain; and midstream and downstream deals continue to be strong.
Drillinginfo's analysis is bullish for U.S. natural gas projects, particularly liquefied natural gas (LNG) exports. The analysts expect "large-scale strategic resource capture transactions, in part to naturally hedge LNG feedstock needs.”