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North America Leads Upstream 3Q Dealmaking
North America led the global upstream merger and acquisition (M&A) marketplace in 3Q2010 with 100 transactions totaling $18.1 billion, or 41% of the $43.8 billion in a total of 154 trades worldwide, according to a tally by PLS Inc. in conjunction with its international partner, Derrick Petroleum Services.
The Permian Basin was a hotspot with Apache Corp. picking up BP’s assets there for $3.1 billion and Concho Resources acquiring New Mexico independent Marbob Energy in a $1.65 billion merger. In the United States, operator emphasis on oil and natural gas liquids was a major transaction stimulus.
“Divestitures among the majors and resurging interest in the oil-rich Permian Basin characterized an otherwise slow market in global transactions during the third quarter,” according to Richard Mason, director of research at PLS.
Apache was heavy into dealmaking in the third quarter, spending $7.1 billion for purchases of BP’s stakes in the Permian Basin, Canada and Egypt. In all, Apache has spent $12.1 billion so far this year with significant corporate acquisitions of Mariner Energy and Devon’s shallow Gulf properties in addition to the third quarter purchase of BP’s divested assets, PLS said.
BP plc accounted for 20% of the dollar volume of 3Q transactions worldwide, as it divested $8.9 billion in properties to raise cash to pay for its efforts to halt the flow of oil and pay damages stemming from its Macondo well blowout in the Gulf of Mexico. The company’s divestiture program is continuing.
The nearly $44 billion in 3Q transactions worldwide was in line with the first and second quarter totals of $49 billion and $44 billion respectively. Year to date, global M&A activity exceeds $136 billion on 491 transactions and is on track to top $150 billion by year end, the PLS report said.
On a dollar value basis, North America was followed by Asia ($17.2 billion); Europe, including the North Sea ($4.4 billion); and South America ($2.2 billion). Other regional transaction totals include Australia ($1.1 billion), Africa ($767.6 million) and the Middle East ($40.6 million).
The joint venture movement that dominated dealmaking in prior quarters slowed markedly during the third quarter. Joint venture transactions in the U.S. tallied $648 million, down from the $4.6 billion that characterized the second quarter 2010, according to PLS.
The $8.9 billion purchase by a mining and metals company, Vedanta Group, of a 51% stake in the energy company Cairn India led all deals globally during the third quarter, followed by Lukoil’s $5.8 billion repurchase of ConocoPhillips’ 13.05% stake in the Russian major, PLS said. As part of its corporate restructuring ConocoPhillips had already sold off its Syncrude Project stake to Sinopec for $4.6 billion in April and divested several other properties for undisclosed amounts.
Oil-weighted deals accounted for $22.0 billion in transaction volume, or 50% of deal value during the quarter, while natural gas-oriented transactions at $10.9 billion represented 25% of global deals and a mixed commodity base generated $10.9 billion in volume, essentially unchanged at 25%.
Asset-based deals represented 52% of transaction value during the period, marking a sharp reversal from recent trends in which similar deals accounted for roughly two-thirds of transaction value, PLS said.
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