North American E&Ps increase cash for dividends and buybacks

Shareholders of U.S and Canadian oil and gas producers continue to benefit from record levels of free cash flow across the upstream sector.

Evaluate Energy’s latest cash flow report shows that 82 North American E&Ps allocated around 27 per cent of all cash used in Q1 to pay dividends or buy back shares. This is a meaningful uptick in total dollar terms and in proportion to other uses of cash.

“Repaying debt was initially a key priority for many North American oil producers as they restored operations impacted by the pandemic,” said Mark Young, report author and senior analyst at Evaluate Energy. “Since the start of Q4 last year, however, this focus has shifted towards shareholder returns via dividend payments and share buybacks.

“Dividend payments and share repurchases saw very slight increases over Q4 spending but rank far higher than anything before then. Q1’s $11 billion on dividends and buybacks is a greater outlay than every quarter in 2020 combined.”

Much like capital spending increases in recent months, these latest increases in shareholder returns are being seen across the industry, with no distinct peer group of companies solely responsible.

“Thirty-four companies, or 41 per cent of our full group of 82, paid dividends to common shareholders in Q1 2022. This is a record for the study period,” said Young. “49 per cent made a net repurchase of shares in Q1 2022, which was also a record.”

For more information on dividends and buybacks for oil, gas and oilsands producers in the U.S. and Canada, download Evaluate Energy’s latest cash flow report.

Free cash flow records tumble among North America’s oil and gas producers in Q1 2022

A significant leap in operating cash flow in Q1 2022 allowed oil and gas producers across the U.S. and Canada to enjoy record levels of free cash flow – again.

The latest cash flow report from Evaluate Energy shows that 82 North American oil and gas companies recorded free cash flow of $29.8 billion in Q1, a $7.3 billion increase over Q4 2021.

“Total Q1 operating cash flow for the group came in at almost $45 billion – the sum of all four quarters in pandemic-hit 2020,” said report author Mark Young, Senior Analyst at Evaluate Energy.

“While capital spending has not kept pace with operating cash flow, spending has consistently increased since Q3 2020. We’re now seeing spending across the industry similar to pre-pandemic trends. Q1 saw the first quarterly capex spend of over $14 billion since early 2020, and capital spending increased to over 35% of total cash used in a quarter for the first time since Q2 2021.”

Data shows capex increases across the industry with no distinct group of producers responsible for the bulk of any spending rise.

“Fifty of the 82 companies in our study group increased spending in Q1 compared to Q4, the sixth quarter in a row where more than 48 increased quarterly spending, after only 10 did so in Q2 2020 at the height of the pandemic,” added Young.

“Latest guidance shows that these spending increases in early 2022 should be sustained throughout the year, with 2022 budgets typically larger than those we saw in 2021.”

For more on the latest cash flow, capex, debt, dividend and share buyback trends for oil, gas and oilsands producers across North America, download the full Evaluate Energy cash flow review.

Upstream M&A falters in Q1 2022 high price environment

Agreeing M&A deals has proven to be difficult for E&P companies in early 2022.

Upstream Q1 deal values are 47% down on the five-year quarterly average as rising commodity prices alter the market dynamic for buyers and sellers, according to new analysis.

Evaluate Energy’s latest M&A report – available for free download here – shows that just $19 billion in new upstream deals were agreed in Q1. This represents a significant decline in activity despite surging oil and gas prices and continued relaxations of Covid restrictions around the world. Q1 saw WTI hit a peak of $123 per barrel, while gas prices rose sixfold in parts of Europe.

“The prices have created a market where buyers and sellers are reluctant to act. Total deal values are 54% down on the prior quarter and 47% down on the five-year quarterly average,” said Eoin Coyne, Senior M&A Analyst at Evaluate Energy and report co-author.

“Deal counts also fell significantly. Potential selling companies have lacked impetus to part with assets contributing to healthy profits unless a very strong offer is delivered, while buyers are wary to match valuations at what is potentially the top of a price cycle.”

Evaluate Energy’s latest M&A report provides further analysis on the impasse between buyers and sellers in the current market, as well as information on the key deals that were agreed in Q1.

Included in the report:

  • U.S. deals dominate the global deal value with Permian assets popular targets
  • Private companies are cashing in on U.S. assets acquired during the downturn
  • Two supermajors realign their African portfolio in deals totaling around $2 billion
  • Canada’s activity limited in tough market, with Vermilion agreeing the only +$100 million deal

Oil and gas producers making deals across the green energy space

Solar, wind energy and hydrogen projects attracted significant deal interest from companies traditionally focused on upstream oil and gas in 2021 – a year that saw major upstream investment across the entire green energy space.

A new mergers and acquisitions report from Evaluate Energy shows that while wind and solar assets continued to attract greater levels of interest from E&P investors in terms of pure deal count – 56% of the 81 deals agreed – a growing number of deals were agreed in less well-established industries.

“2021 saw a greater number of emerging sectors gain traction among oil and gas players,” said Mark Young, report co-author and Senior Analyst at Evaluate Energy. “In terms of highlights away from wind and solar, we saw eight deals made relating to hydrogen production projects and six deals apiece in the electric vehicle charging and biofuels spaces.

“Investor and public pressures to diversify portfolios has led to oil and gas producers spreading into all sorts of new low-carbon technologies and innovative or renewable energy producing projects around the world.

“We would expect this trend to continue, especially with many producers recently going public with ambitious net zero targets for this decade and beyond.”

For more detail on 2021 green energy deals, as well as investments made by the most active E&P companies in green energy – such as Shell, Eni, TotalEnergies, BP and Chevron – download Evaluate Energy’s latest M&A report at the link below.

New ESG learning platform delivers vital insights for O&G leaders and teams

A new ESG learning platform is providing the skills and tools to fill a vital knowledge gap in the oil and gas industry.

Launched this week, Evaluate Energy ESG Learning offers on-demand and live courses delivered by leading experts in oil and gas. The new platform reflects a desire among employers to build ESG capability throughout their organizations. Executives and front-line staff are seeking new ‘ESG skills’ to support businesses and position them for long-term growth.

“The O&G industry has the most complicated ESG challenges of any industry,” said Bemal Mehta, Managing Director, Energy Intelligence, Evaluate Energy. “Organizations like the World Energy Council call this the Energy Trilemma: balancing energy security, energy equity and environmental sustainability. Our learning platform provides the knowledge and practical tools to address the unique ESG issues facing operators.”

Evaluate Energy ESG Learning is the first education platform designed for the O&G industry with its fit-for-purpose curriculum approach, said Mehta.

On-demand and live courses provide the knowledge to support strategic and operational ESG efforts. Foundational and advanced course options are available.​ Courses relevant to specific oil and gas geographies and regulatory environments will also be provided.

“Many companies are yet to acquire the full complement of ESG skills to navigate this dynamic and challenging environment,” said Mehta. “They will need to provide their teams with leading-edge skills and knowledge.”

Courses are developed with extensive participation and consultation with organizations leading ESG efforts.

The first on-demand course is ‘ESG Essentials’ for O&G Executives. Click here for the course summary and pricing.

Find the ideal course for you and your team here: Evaluate Energy | E-Learning

Over 4 million boe/d of production traded as deal values bounce back in 2021

Global upstream deal values within oil and gas returned to pre-pandemic levels in 2021, while the largest volume of production changed hands in more than a decade, according to new data from Evaluate Energy.

The recovery in M&A was driven by rising demand and prices following a year of under-investment in new supply, said Eoin Coyne, Evaluate Energy’s senior M&A analyst.

“2021 saw $144 billion in new upstream deals agreed,” said Coyne, co-author of Evaluate Energy’s latest annual M&A report. “This value is 53% higher than the spend in 2020 and in line with the five-year average annual spend prior to 2020.”

The report – available here – analyses the biggest deals of 2021, including green energy deals and investments agreed by traditional oil and gas majors.

“The fact that overall spend for the year was in line with the non-Covid average annual spend hides just how much upstream M&A took place in 2021,” added Coyne, who co-authored the report. “Over 4 million boe/d of production changed hands around the world, which is the largest total since Evaluate Energy began tracking M&A deals in the oil industry 14 years ago.”

Included within the report:

  • Woodside, Santos and BHP undertake multibillion-dollar international mergers
  • Pioneer, ConocoPhillips and Continental Resources make Permian acquisitions as Shell exits
  • Gas companies join the consolidation wave in the U.S.
  • Canadian deals are headlined by the merger of ARC Resources and Seven Generations, and the Cenovus asset sale program
  • Shell, Eni and Chevron are among E&P majors to make significant green energy sector investments in 2021

 

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Free cash flow continues to soar for North American producers in Q3

Record levels of free cash flow continue to be generated by North America’s oil and gas producers according to a new report from Evaluate Energy that outlines how that cash is being used.

Free cash flow – the difference between operating cash flow and capex – reached a combined $19.1 billion in Q3 2021 for a study group of 84 U.S. and Canadian producers. The full report is available at this link.

“No quarter since the start of 2018 has seen a higher total operating cash flow than Q3’s $32.5 billion, while capital spending was flat from Q2 to Q3 for the study group,” said Mark Young, report author and Senior Oil & Gas Analyst at Evaluate Energy.

Four peer groups within the report are based on whether a producer has a U.S. or Canadian headquarters plus their respective oil weightings. Canada’s five oilsands majors are separated out into a fifth peer group.

“Companies treated capex priorities very differently in Q3 compared to Q2,” Young said. “Every group we examined cut capex as a percentage of operating cash flow compared to Q2.

“Ironically, in Q2 it was almost entirely the reverse – save for U.S. oil producers, every group saw capex increase as a percentage of operating cash flow compared to Q1. Debt repayments took centre stage in Q3 instead of capital spend.”

For the combined group of 84, capital spending being flat at $13.4 billion in Q3 meant capex came in at just 41% of operating cash flow.

The report also shows how far each group used extra cash flow on repaying debt and increasing shareholder returns via dividends and share repurchase plans.

Permian Basin sees US$30 billion of upstream M&A in just 6 months

Evaluate Energy’s latest M&A report shows that between the start of April and the end of September, the Permian Basin in the United States saw almost US$30 billion in new M&A deals announced for E&P assets.

“After a bumper quarter in Q2 that saw over US$18 billion in new deals agreed, Q3 saw just under US$12 billion of its own,” said Eoin Coyne, report author and Senior Analyst at Evaluate Energy.

The vast majority of this Q3 spend came from ConocoPhillips acquiring the Permian assets of Royal Dutch Shell for US$9.5 billion in cash.

“ConocoPhillips had already made a major move with the $13 billion acquisition of Concho Resources during Q4 2020,” said Coyne. “That was an all-stock deal, so ConocoPhillips retained enough liquidity to fund this latest transaction with available cash.”

The other ~US$2.5 billion in Permian deals this quarter included deals by Callon Petroleum, Lime Rock Resources and a royalty interest acquisition by Viper Energy Partners.

For more on these deals and other U.S., Canadian and global upstream M&A activity in Q3 2021, download Evaluate Energy’s latest M&A report at this link.

Top U.S. Upstream Deals in Q3 2021 (Permian deals in bold)

Eni, Shell lead oil producers in green energy deal making in 2021

Eni and Shell have been the most active among traditional oil and gas producers when it comes to green energy sector deal making in 2021, according to a new report from Evaluate Energy.

Over the past few years, intense and consistent investor pressure over carbon usage and climate goals has prompted many E&P companies to explore options in greener energy sectors and diversify their portfolios.

Evaluate Energy’s new report includes a rundown of every upstream deal in Q3 2021 and details on green energy investments by oil and gas producers. It is available for download at this link.

Eni’s busy third quarter is the reason for its position atop the rankings.

“Four of Eni’s six green energy deals were announced between July and September,” said Mark Young, report co-author and Senior Analyst at Evaluate Energy. “These latest investments will see the company acquire Italy’s second largest operator in the electric vehicle charging space, as well as increase its European wind and solar operational capacity by over 650MW.”

Shell joins Eni with six investments made up to September 30.

“Early activity from Shell this year was also mainly focused on European markets, but its two most recent investments have both been in the U.S.,” said Young. “These two U.S. deals included the acquisition of a renewable energy residential retailer and a sustainable fuels producer.”

Details on all of Q3’s major green energy investments by Eni, Shell and other upstream companies are available as part of Evaluate Energy’s latest M&A report.

Note for chart: “Other” includes deals in the following sectors, among others: Biomethane, Geothermal, Hydro, Retail power from renewable energy, Green energy-related technology.

Upstream M&A rises to $44 billion in Q3 2021

Evaluate Energy’s latest report shows that upstream M&A spending reached $44 billion around the world during Q3 based on deals announced between July and September.

This total is:

  • 23% higher than $36 billion in Q2; and
  • 25% higher than average quarterly spending over the past five years.

Spending was supported by strong prices for oil and gas.

“Oil demand increases reflected a resurgent global economy and a relative lack of supply from either the free market or OPEC+,” said Eoin Coyne, report author and Senior Oil & Gas Analyst at Evaluate Energy. “This led to an average WTI price in Q3 of $70.23, the highest quarterly average price since 2014. Natural gas saw an even more acute imbalance. Parts of Europe saw record natural gas prices and Henry Hub price averages in the U.S. hit $4.19, an increase of 47% on the average price in Q2.”

Despite the increase in deal value on previous quarters, the overall activity level was unchanged.

“What we refer to as ‘significant deal counts’ were identical in Q3 and Q2,” Coyne said. “Thirty-five deals were valued at greater than $50 million in both quarters. Larger corporate deals and higher valuations for asset deals due to increased oil and gas prices accounted for the overall higher deal value in Q3.”

Evaluate Energy’s M&A report for Q3 2021 includes analysis on the following:

  • Permian Basin deals involving Shell, ConocoPhillips, Callon Petroleum and more
  • Spartan Delta’s continued growth in Canada and a recent spike in royalty interest acquisitions involving Topaz Energy and PrairieSky
  • Multibillion-dollar deals affecting the natural gas industry in Australia and Brazil’s ultra-deepwater oilfields
  • Green energy sector deals involving Shell, BP, Eni and Galp