Shell has sold US$27 billion in assets since acquiring BG Group

Since agreeing the largest single upstream-centric deal of the past 10 years to purchase BG Group back in April 2015, Royal Dutch Shell has been selling assets all over the world to rationalize its portfolio.

Including this week’s US$750 million sale of an offshore shallow water gas field in Thailand, the company has now agreed sales of assets and business units for a grand total of just under US$27 billion between April 8, 2015 – the day the BG deal was first announced – and January 31, 2018.

According to data available in Evaluate Energy’s M&A database, Shell has been involved in 48 separate asset sales since the BG announcement, five of which were agreed for a value of over US$1 billion. From the Canadian oilsands to pipelines in the U.S. and chemical businesses in Saudi Arabia, the company’s sales have taken place all over the world and in a variety of business segments.

In terms of deal value, at US$9.4 billion it was Canada that saw the highest amount accumulated in asset or business unit sales by Shell since April 2015. The majority of this value revolves around the US$8.3 billion sale of a 60% stake in the Athabasca Oil Sands Project to Canadian Natural Resources in March last year. This is still the largest individual sale that Shell has made since acquiring BG.

The United States, where 11 Shell sales took place, saw the highest number of individual deals agreed, ahead of the UK with eight and Canada with five.

This US$27 billion is also probably just the tip of the iceberg; of the 48 individual divestitures Shell has agreed to since April 2015, the acquisition cost for 19 of them remained confidential. A number of these involved the kinds of assets that would normally change hands for sizeable sums, including the sale of stakes in an Iraqi oil field, a Chinese lubricants business and a Malaysian LNG export facility.

For more on Shell’s asset divestments and indeed any acquisitions made over the past 10 years, request a demonstration of Evaluate Energy’s M&A database at this link.

Top 5 Shell divestitures since April 8, 2015 by reported value 

Source: Evaluate Energy M&A Database

Notes to charts:

1) In deals with multiple countries or segments involved, a deal was assigned to a country and a business segment according to where the majority of the value was estimated to reside.
2) Deals were assigned to a time period based on the deal announcement date.
3) Deals in the midstream segment include deals for LNG, pipelines, storage, terminal assets and processing facilities. Deals in the downstream segment include deals for refineries, service stations, chemical production facilities and oil product marketing assets.

Canadian companies hedged almost 1.1 million bbl/d of oil in Q4

On the eve of TSX annual results for 2017 being released, new data from CanOils reveals that almost 1.1 million barrels per day of oil and NGL were covered by hedging contracts in the fourth quarter.

Cenovus Energy Inc. led the way with 299,000 bbl/d of oil and NGLs hedged heading into Q4 2017. Encana Corp. was the largest natural gas hedger with contracts in place for 865 mmcf/d of natural gas in Q4 (a volume equivalent to 92% of its Q3 2017 gas production).

By isolating hedging details released by Canadian E&P companies in Q3 filings, CanOils identified a group of 62 ‘active hedgers’. CanOils defines this group as companies heading to the next reporting period with more than 10% of their production portfolio under hedging contracts.

Combined, these ‘active hedgers’ had 1.1 million bbl/d of oil and NGLs plus 4.8 bcf/d of natural gas volumes under hedging contracts heading into the fourth quarter – a combined total of almost 1.9 million boe/d hedged. This is a 35% increase on volumes hedged by the equivalent group of hedgers from this time last year (see note 1).

The CanOils hedging database enables contract-by-contract analysis of every hedging contract put in place by Canadian-listed upstream companies. Users can dissect the terms of every active hedging contract and review locked-in oil and gas sales prices years into the future. To request a demo of the database, click here.

Source: CanOils Hedging Database – All hedging figures for the above periods are sourced from Q3 2016 and Q3 2017 reports, respectively.

Top 10 Canadian-listed active hedgers in Q4 2017, by combined oil, gas and NGL volumes hedged

Source: CanOils Hedging Database


1) The group of ‘active hedgers’ altered significantly since this time last year. Nine companies joined the group having either adjusted their strategies to cover more than 10% of their portfolios with hedging contracts or having been created between the two time periods. Six companies departed the group between Q4 2016 and Q4 2017 due either to corporate sales processes, stock market de-listings or changes in hedging strategy. The groups for both time periods include Canadian-listed companies that have their entire production base overseas.

  • New companies: Athabasca Oil Corp., Birchcliff Energy Ltd., Chinook Energy Inc., Hemisphere Energy Corp., Pine Cliff Energy Ltd., Pinedale Energy Ltd, Razor Energy Corp., TransGlobe Energy Corp., Zargon Oil & Gas Ltd.
  • Removed companies: Ithaca Energy Inc., Kelt Exploration Ltd., PetroShale Inc., Questfire Energy Corp., Rooster Energy Ltd., Trilogy Energy Corp.

2) MEG Energy Corp. also hedged 15,150 bbl/d in condensate purchases heading into Q4 related to its diluent needs. These volumes are not included in this table, but details on the contract and similar contracts for other companies are accessible via a CanOils subscription.

Why major investors are now being drawn to Mexico’s oil sector

Mexico’s abundant on-shore and offshore basins are now starting to attract significant independent and foreign investment.

Fuelled by Mexico’s energy reforms, enacted in 2014, 2017 saw more than $800 million in upstream deals agreed by state-controlled Pemex to form joint ventures on a handful of major projects. Several successful licensing rounds were also completed.

This sudden flood of activity means that only Brazil, Argentina and Colombia have seen more deals in pure dollar terms since 2014, according to a new report released in partnership by the Daily Oil Bulletin, Evaluate Energy and Sproule. Entitled Latin America: Assessing the impact of oil prices, energy reforms and national oil companies on deal activity, the report is available for download here.

Source: Latin America: Assessing the impact of oil prices, energy reforms and national oil companies on deal activity

The new report shows that while Brazil and Argentina lead by far with US$12.9 billion and US$7.8 billion in upstream sector deals since the start of 2014, respectively, Mexico is suddenly only slightly behind Colombia in fourth place in the rankings over the full four-year timeframe after this busy year of deals since the end of 2016. If the momentum achieved in 2017 continues, Mexico can expect significant additional investment over the next 11 months.

“Touted as having one of the best energy futures of any developing nation, Mexico has abundant untapped potential in both onshore and offshore basins, including virtually untouched unconventional resources,” said Jim Chisholm, report co-author and Vice President, Latin America, at Sproule.

“Since these reforms began, the country has been hard at work attracting foreign investment and continuing to build a robust regulatory and investment environment to support future growth.”

For more information on upstream M&A activity in Mexico, including details on the seven stages of license awards, Pemex’s US$800 million in joint arrangements and an overview of the licensing award schedule for 2018 and beyond, download the full report from the Daily Oil Bulletin, Evaluate Energy and Sproule at this link.

Follow Sproule on LinkedIn for the latest updates.

Why Canada saw C$42 billion in upstream deals in 2017 – and what this means for 2018

Canada’s upstream sector saw almost C$42 billion in new deals agreed in 2017 – a 91% increase over the five-year annual average – as a few massive oilsands deals offset a drop in overall deal-flow.

Source: CanOils M&A Database – deals are assigned to a year based on their announcement date.

2017 saw $32 billion in spent in three major oilsands deals, which comprised more than three-quarters of the year’s outlay for Canadian upstream assets.

“While 2017 saw the largest spend for a full calendar year since 2014, it’s hard to ignore the fact that a handful of oilsands acquisitions are far and away the key drivers here,” said Chris Wilson, Managing Director at CanOils. “Ignoring deal values, we saw that the number of Canadian upstream deals agreed, excluding land sales, was down by 20 in 2017 from 162 last year.”

The year ended quietly – with just C$117 million in new deals agreed in December according to data available in CanOils’ latest M&A report. There are reasons for optimism, however, heading into 2018.

“2017 was a relatively stable year for the oil price and in general M&A markets around the world have responded positively,” said Wilson.

“After the price downturn, the Canadian upstream sector is populated by companies that are typically much leaner now in terms of production costs and also much more stable in terms of balance sheets. This all seems to suggest that it will not be too long before we see a greater volume of deals being agreed for Canadian assets once again.”

A full rundown of 2017’s largest deals in Canada is available free in a new CanOils report focused on December activity. Click here to access it.

The Permian Basin is still the prime U.S. upstream acquisition target

The Permian Basin was the U.S. upstream sector’s top acquisition target for the fourth year in a row in 2017, according to new data from Evaluate Energy.

As part of a new report that analyses the key M&A trends around the world from the past 12 months, Evaluate Energy shows that the Permian Basin dominated M&A headlines in the U.S. sector with $26.4 billion in new deals announced. This total was almost $15 billion greater than the $10.9 billion in new deals seen in the Marcellus shale, the next most popular acquisition target in terms of dollars spent.

The full report is available for download here.

Source: Evaluate Energy M&A Review 2017, download here.

“While the Marcellus shale did have a big year, and also recorded the largest individual U.S. upstream deal of the year with EQT Corp. acquiring Rice Energy Inc. for US$8.2 billion, the activity here just doesn’t match up to the Permian,” said Eoin Coyne, lead author of the new report in his role as Senior M&A Analyst, Evaluate Energy.

The Permian doesn’t only stand out in terms of the U.S. domestic market, either.

The US$26.4 billion invested in new Permian Basin deals, while marginally lower than the US$27.1 billion recorded in 2016, means that the Permian accounted for 16% of the total value spent on upstream deals last year worldwide.

“The total spend in the basin did slightly decrease from last year, but it would be wrong to infer any waning of interest,” continued Coyne. “It is likely a combination of less distressed asset sales and a stronger oil price. Buyers and sellers have probably just found it harder to agree on a strike price. For the deals that have been agreed, we can see much higher values per acre in 2017 than a year before.”

More information and analysis on 2017’s M&A activity in the Permian Basin and across the U.S. can be found in the Evaluate Energy report, which is available for download at this link.

Floor of US$50 WTI expected to encouraged continued M&A activity in 2018

With $163 billion agreed in new upstream deals in 2017, Evaluate Energy’s latest report suggests that the recently improving oil price will encourage continued M&A spending around the world in 2018.

The full report is available to download here.

“Heading into 2018, the oil industry finds itself in a far healthier position than at this point two years ago, when the oil price was sub-$40 and OPEC remained firm in its stance to let the free market dictate the oil price,” said Eoin Coyne, lead author of the new report in his role as Senior M&A Analyst at Evaluate Energy.

“Since this time, there has been significant progress from industry in pushing down production costs, while the companies that survived have more stable balance sheets. With OPEC’s production cut extending to the end of 2018, we expect the oil price to have a supporting floor of $50 in the coming year,” added Coyne.

Oil companies at large have always used the current trading price of oil as the best barometer of how expansive to be in their investments. If the oil price behaves as expected, we can expect the 2018 total spend to match or improve upon the $163 billion reached in 2017.

Source: Evaluate Energy M&A Review, 2017

The Evaluate Energy report also provides insight on the companies that are best positioned to take advantage of deal opportunities in the coming year by looking at some key debt ratios.

“The ability to assume debt will continue to be a limiting factor with regard to how much is invested in M&A strategies,” added Coyne. “However, some of the world’s largest oil companies are in what we would describe as a “healthy” position, debt-wise, which should lead to another interesting year for upstream M&A in 2018.”

More information on the companies with the greatest ability to assume more debt, according to Evaluate Energy calculations, is available in the report, which can be downloaded here.

Brazil: New regulations spur offshore investment surge

Brazil secured an encouraging US$3 billion in bonus bids during key licensing rounds held last fall, according to a new report, which represents 23% of the country’s total upstream deal values since 2014.

This fresh investment, notably in offshore pre-salt basins, follows the introduction of significant regulatory changes to the oil and gas sector within Brazil.

The report, entitled Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity, is produced by the Daily Oil Bulletin, Evaluate Energy and Sproule. It assesses the impacts on deal-flow and itemizes the bonus bids made by several global oil and gas powerhouses. It also highlights the key upstream deals within the other US$9.9 billion in upstream deals agreed in Brazil between 2014-2017. With a total of US$12.9 billion, Brazil witnessed more M&A activity in terms of pure deal values than any other Latin American nation.

Source: Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity.

“Recent bid rounds have been dominated by large, multinational independents and national oil companies attracted to prolific deepwater targets,” said Jim Chisholm, report co-author and Vice President, Latin America, at Sproule. “As the political situation and Petrobras stabilize, Brazil should be well placed to attract significant investment, both in its prolific offshore basins and resource-rich but relatively untapped onshore basins.”

The full report, which includes analysis of M&A trends in Brazil, Mexico, Argentina and Colombia, is available for download here.

Follow Sproule on LinkedIn for the latest updates.

Global upstream M&A reaches $163 billion in 2017

In a relatively stable year for the oil and gas industry, overall M&A spend – based on deals announced – in the upstream sector reached $163 billion during 2017, according to a new report released today by Evaluate Energy.

The full report is available for download here and provides insight and analysis on all the key deals of the year around the world.

This total of $163 billion in new upstream sector deals is 17% higher than the $139 billion reached during 2016 and is also the highest annual outlay since 2014, the year the oil price first dropped in this current cycle.

Source: Evaluate Energy M&A Review for 2017

Deal counts were also up, year-over-year.

“Upstream deal values were high in 2017 compared to recent years, but the data also shows a real increase in underlying activity this year. The number of what we refer to as ‘significant’ deals – those with a value of over $10 million – was up by 10% from 2016,” said Eoin Coyne, lead author of the new report in his role as Senior M&A Analyst at Evaluate Energy.

The oil price has been the key driver behind this increased activity in what has been the strongest year for the average price since 2014. In 2017, the WTI price averaged $50.80, which is 17% higher than the 2016 average of $43.29.

The outlook for activity in the coming year is equally bright. “The WTI price hasn’t closed below $50 for more than three months and is currently trading in excess of $60, which all bodes well for market stability,” added Coyne. “Also, OPEC has extended its support for the oil price by extending its production cut to the end of 2018.”

For more on all the key deal trends in the upstream sector in 2017, download the full report here. The report includes detailed overviews of the largest deals in North America, Europe and Latin America.

Robust deal making in Latin America bucks global trend

Upstream M&A activity in Latin America has been able to largely withstand falling oil prices that stalled deal flow in many regions of the world, with deal counts largely unaffected.

That is one of the key findings of a new report on Latin America released this week by the Daily Oil Bulletin, Evaluate Energy and Sproule.

Source: Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity.

“While motivations for various deals changed and individual deal values may have dropped in light of the price downturn, the number of deals agreed over time shows little to no correlation with the falling oil price,” said Darrell Stonehouse, report co-author and DOB’s special projects editor. “In fact, looking at deal counts alone, it would be near impossible to pinpoint when the price downturn actually took place.”

The report, entitled Latin America: Assessing The Impact Of Oil Prices, Energy Reforms And National Oil Companies On Deal Activity, includes analysis of Brazil, Mexico, Argentina and Colombia. It is available for download here.

Latin America is one of the world’s fastest growing upstream environments. With major producing countries in the region racing to attract investment, the deal counts illustrate that even in the toughest of investment environments there is a willingness to deal.

Added Stonehouse: “This attraction to Latin American upstream assets, together with strategic energy reforms being implemented by Latin American governments, should mean that deals for Latin America’s upstream assets would continue to generate headlines in the near future.”

Follow Sproule on LinkedIn for the latest updates.

November saw C$976 million in new Canadian upstream deals

Canada saw less than C$1 billion in new upstream M&A activity for the first time in three months according to the latest M&A review from CanOils. November’s total of C$976 million represents a significant fall of 46 per cent and 39 per cent, respectively, from totals witnessed in September and October.

Source: CanOils M&A Review, November 2017

The single largest deal in November was another asset sale by Cenovus Energy. The company agreed to sell its Weyburn unit in Saskatchewan to Whitecap Resources, in so doing reaching a major debt milestone related to its C$17.7 billion acquisition from ConocoPhillips.

This month also saw Pengrowth Energy continue its asset sales program in Alberta, completing a C$150 million deal in Swan Hills and agreeing another minor deal in Quirk Creek. The company will focus its efforts on two assets going forward – thermal oil production at Lindbergh and Montney gas at Groundbirch.

November saw almost 28,000 boe/d put up for sale in new public asset listings. Full analysis on all deals and asset listings in November are available in the CanOils report, which can be downloaded here.