Transactions for unconventional natural gas and oil properties dominated the U.S. deal-making landscape in 2Q2010 with 32 deals totaling $12.9 billion, or 59% of U.S. total value, according to a report issued Wednesday by Houston-based PLS Inc. and Derrick Petroleum Services.

Global merger and acquisition (M&A) activity in 2Q2010 totaled $43.1 billion in 165 transactions, ahead of the $47.7 billion in 157 transactions reported in 1Q2010. In the first six months, $90.8 billion was spent on 322 M&A deals, which is tracking to surpass the 2009 full-year total of $150.1 billion in 500 transactions and “fast approaching” the full-year 2008 pace of $114.7 billion in 556 deals.

“Despite the small sequential drop in 2Q2010 dollar volume, the 2010 transaction market remains dynamic as large international and national oil companies continue to pursue North American unconventional opportunities with the expectation of gaining expertise to use overseas,” said PLS Research Director Richard Mason. “In addition, buyers looking to reduce natural gas exposure are finding opportunistic sellers of conventional oil assets.”

North America led all regions in deal activity, with a total volume of $36.6 billion on 128 transactions — 85% of total transaction value. Latin America ($3.3 billion) was second, followed by Europe ($1.9 billion) and Asia outside the Middle East ($870 million).

In the United States, the Marcellus Shale “led all unconventional plays with nine deals for $8.2 billion,” the report noted. The biggest Marcellus transactions tracked in the period were:

The Eagle Ford Shale in Texas also witnessed eight transactions that topped $3.1 billion in value in the period, including:

“Overall, acreage in the Eagle Ford continues to rise in value as operators adjust their business plans in the face of recent success and new competition from firms like Shell, KKR, Talisman and Reliance. For perspective, the Marcellus and Eagle Ford shales represented 88% of all unconventional transactions on a dollar-volume basis and 52% of all U.S. transactions during the period,” the report noted.

Apache Corp.’s $3.9 billion acquisition of Mariner Energy Inc. was one of the top corporate transactions in the quarter, and with the purchase of Devon Energy Corp.’s Gulf of Mexico shallow-water assets also in the period, Apache’s total deal activity rose to almost $5 billion (see Daily GPI, April 16; April 13).

“In addition to Apache’s acquisition of Mariner Energy, other significant U.S. corporate acquisitions include SandRidge Energy’s $1.5 billion offer for Arena Resources in the Permian Basin, which SandRidge sweetened in June as its stock price fell,” noted PLS (see Daily GPI, April 6).

In all, the United States accounted for $6 billion in corporate acquisitions on six deals during the period. Canada boasted 18 corporate transactions totaling $3.4 billion. Canada’s Crescent Point Energy “continued its consolidation of Lower Shauvanon and Bakken assets in Saskatchewan with the $1 billion purchase of Shelter Bay Energy Inc., followed by the $119 million acquisition of Ryland Oil Corp. Legacy Oil + Gas acquired CanEra Resources, Villanova Resources and assets in southwest Alberta and Saskatchewan for a combined $694 million.”

By commodity, natural gas-weighted transactions totaled $15.1 billion, or 35% of the worldwide deals. Oil-weighted transactions accounted for $16.8 billion in volume, 39% of deal value in the period, which was down from $29.6 billion in 1Q2010. “Deals that involved an equally weighted commodity base generated $11.0 billion in volume,” up from $5.7 billion in the first three months of this year, the report noted.

U.S. natural gas-weighted deals represented 45% of dollar value in 2Q2010; oil-oriented deals totaled 13%. Equally weighted oil and gas properties represented 41.5% of dollar volume during the period.

“The U.S. witnessed 14 conventional deals totaling $8.9 billion during the quarter compared with 19 deals worth $7.4 billion during the first quarter of 2010,” according to the report. “On a metric basis, the price paid for production fell 20% versus the first three months of 2010 to $70,352/boe per day, while the price for proved reserves rose 51% to $19.93/boe on the basis of a sharp sequential drop in the reserves-to-production ratio and a jump in oil-oriented transactions.”

U.S. oil-weighted deals in 2Q2010 accounted for slightly more than half (51%) of conventional transactions, up from 23% in 1Q2010.

“The consistent deal activity in the first half of the year highlights a robust marketplace that should continue through the rest of 2010 as long as capital markets remain open and oil prices hold near recent levels,” said Mason. “Fickle” gas prices and the Gulf of Mexico Macondo blowout “are creating uncertainty that could spark additional deal making both offshore and onshore in the U.S.”

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