The United States continued to crush the global merger and acquisition (M&A) market between April and June, but deal values in the first half of 2013 (1H2013) represented the lowest six-month period since at least 2007, according to a survey by PLS Inc. and partner Derrick Petroleum Services.

Global M&A upstream deal activity in the second period rose 19% sequentially from 1Q2013 to $24.9 billion in 141 announced transactions. In 1Q2013, deal activity totaled $20.9 billion from 117 deals, which was off 12% year/year from $28.4 billion in 173 deals. Deals in 4Q2012 brought in $138 billion from 223 transactions.

Only deals with price disclosures were included in the PLS/Derrick summary. Earlier this month, Evaluate Energy reported similar numbers, noting that M&A activity had fallen (see NGI, July 8). According to the PLS/Derrick survey, 71 U.S. transactions worth $7.92 billion were announced in 2Q2013, versus 80 worth $11.44 billion in the year-ago period. Sixty U.S. transactions totaling $13.21 billion were announced in the first three months of this year.

“In the U.S., in contrast to early 2009, the economic environment is on the upswing, equity markets have been rising nicely, oil and gas prices are relatively stable and there is plenty of deal inventory,” said PLS Managing Director Brian Lidsky. U.S. deal values dropped 40% in 2Q2013 from the previous three months, and U.S. global market share fell by half to 32%. Since 2007, the quarterly average U.S. deal count has been at 70, while the deal value has been $16.4 billion. The 2Q2013 U.S. deal value was the lowest since 2Q2009’s $4.1 billion.

No U.S. deal breached the $1 billion mark, Lidsky noted. “An interesting dynamic in 2Q2013 is that 52% of the deal value went largely to producing assets — as opposed to corporate takeovers or early stage development projects.” Furthering an “entrenched team of the recent markets,” two of the biggest deals were bought by publicly financed master limited partnerships (MLP), “reinforcing the buying strength of this sector.

“The other buying strength in the U.S., primarily Asian companies, however, did not show up in 2Q2013. We view this as a pause, not a departure from their strong demand for North American assets.”

Regarding upstream U.S. valuations, current multiples for proved developed producing-weighted assets continue to rise, the survey found. “For oil assets the multiples are $120,000/b/d, or $22.50 per proved bbl…For gas, the multiples are $5,800/Mcf/d and $1.75/proved Mcf.”

In North America, there were $10 billion in total transactions during 2Q2013, which led the world with a 40% share, but it was down from 65% in 1Q2013. Between April and June, 99 transactions were announced, versus 96 a year earlier, with values year/year at $9.96 billion versus $13.82 billion. Global transactions in 1H2013 were valued at $45.8 billion, the lowest in six years.

“The lack of mega-deals is likely due to a conservative stance on the part of buyers, after several years of intense investment in new positions in the resource plays,” Lidsky said. “Many companies have already established large acreage positions and are turning their attention and their capital to drilling the acreage. Also, there is a large deal inventory so buyers are not in a rush to strike large deals. Smaller deals are getting done at a close to normal pace.”

Six global deals topped $1 billion in the latest period, including Suncor Energy’s sale of Western Canadian gas properties to Centrica plc and Qatar Petroleum International (see NGI, April 22). For perspective, since 2007 the average pace of deals valued at more than $1 billion is 8.75 per quarter, PLS noted.

At the end of June, the inventory of transactions in play was rising, hitting $133 billion, versus $116 billion at the end of March and $85 billion at the end of 2012. (see related story). The United States has the largest inventory of deals on the market with an estimated $37 billion, followed by Canada with $17 billion and Brazil and Russia, each with $15 billion.

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