Author: Mark Young

Majors make $22 billion in global E&P asset sales so far this year

The world’s largest E&P companies have been extremely active in selling assets this year according to analysis available in Evaluate Energy’s latest M&A infographic.

Evaluate Energy’s data shows that over $22 billion has been raised by oil and gas majors – public companies with an enterprise value of over $10 billion – since the start of 2022 by selling assets or stakes in their upstream portfolios.

“There have been 46 individual deals with majors selling assets since the start of the year across 17 countries, with a large number of assets sold to private equity buyers,” explains Eoin Coyne, Evaluate Energy’s Senior M&A Analyst.

While sales have been frequent, acquisitions have been thin on the ground.

“The current price environment is seemingly steering these producers towards sales and potentially furthering development of existing core assets and away from any kind of widespread acquisition activities,” said Coyne.

“Investment in renewable energy sectors has also been growing.”

Evaluate Energy’s Q3 infographic provides detailed information on asset sales by Repsol, ExxonMobil and Shell, among others.

Upstream M&A hits $22 billion in Q2 2022 in another modest quarter of activity

High oil and gas prices continue to stifle market activity when it comes to E&P deal-making.

Evaluate Energy’s latest infographic focuses on upstream M&A in Q2 2022 – and is available to download free here. It details a total of $22 billion in new deals; albeit, the second consecutive quarter with historically modest activity levels.

“Q2’s $22 billion is an uptick over last quarter but 35% down on the five-year average total per quarter, with high prices the primary driver,” said Eoin Coyne, senior analyst at Evaluate Energy. “As we saw in Q1, buyers seem unwilling to make deals at top-of-the-market prices, while sellers have little impetus to part with assets contributing to healthy profits unless a strong offer is made.”

The infographic expands on these and other external pressures that may be hindering activity, while also providing information on:

  • All the major Q2 deals
  • The largest U.S. merger of 2022
  • The active role now taken by private companies
  • Canada’s most active quarter of deal-making since Covid-19 hit
  • Activity in Qatar related to the single largest LNG project in history

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

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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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

Oilsands majors accrue $7.8 billion in free cash flow in H1 2021

Canada’s oilsands majors continue to generate huge amounts of free cash flow in 2021.

Higher commodity prices in the first half of 2021, coupled with a slow return to pre-pandemic levels of capital spending, has resulted in operating cash flow significantly outweighing capital budgets for many producers across the U.S. and Canadian upstream sectors this year.

This is especially true in the Canadian oilsands, with Canadian Natural Resources, Cenovus Energy, Imperial Oil, MEG Energy and Suncor Energy recording a combined free cash flow of $7.8 billion in the first half of the year.

This analysis is part of a new Evaluate Energy report on key cash flow and capital management trends across the North American upstream sector. Access the report here.

While it is not unusual for oilsands producers to generate billions in free cash flow, these 2021 values remain highly significant. Only three financial quarters between the start of 2018 and the beginning of the pandemic in Q1 2020 saw values higher than the free cash flow recorded in either Q1 or Q2 2021.

Despite this recent high in free cash flow, the data also shows that capital spending has now recovered to pre-pandemic levels for the five producers.

These oilsands companies never deviated far from spending $2.5-$3.5 billion each quarter before the pandemic started in Q1 2020, and Q2 2021 was the first quarter of that magnitude since. This can actually be seen across the Canadian industry, with the other 37 Canadian producers in our report recording combined Q2 capex greater than averages seen prior to the pandemic.

Evaluate Energy’s Q2 2021 cash flow review for North American oil and gas producers is available now. The report includes analysis of dividend increases, capital budget levels and debt-related spending for 86 U.S. and Canadian oil and gas producers.

Canada’s top oil and gas operators of 2021

The 2021 Top Operators Report from the Daily Oil Bulletin looks back at how Canada’s oil and gas leaders pivoted to meet the challenges of 2020, and how they are positioning their organizations for future success.

Download the report here.

Once again, the report taps into the experience of professional services firm KPMG in Canada to provide insight into what strategies operators could pursue to thrive in the current environment.

The report also features a broad swath of the insights and opinions from industry leaders gleaned from Daily Oil Bulletin coverage, along with commentary from data providers Evaluate Energy and CanOils.

The following articles available via JWN Energy contain some of the key takeaways from the report:

 

Share buybacks will be key theme in second half of 2021

More and more oil and gas producers are releasing plans for major share buybacks after a bumper six-month period for free cash flow.

Buybacks are welcomed by investors as they tend to boost share prices in the short-term and improve per share benchmarks as the number of outstanding shares in the market is reduced.

Our analysis of North American producers showed that debt repayments and tidying balance sheets were key points of focus in Q1 2021 as free cash flow began to increase significantly after a dire 2020. The same trends can be seen globally.

Now that cash flow has been consistently high for longer, rewarding shareholders through share repurchases appears to be the next step for many producers, judging by the recent outpouring of buyback announcements we’ve seen accompanying oil company Q2 results around the world. Dividend increases are also expected across the industry.

Below, we have summarized buyback plans recently announced by some of the world’s largest oil and gas companies:

BP

The British supermajor intends to execute a share buyback of $1.4 billion before releasing its Q3 results. Based on the company’s current forecasts and pricing assumptions, BP expects to deliver buybacks of around $1 billion per quarter and have capacity for an annual increase in the dividend per ordinary share of around 4% on average through 2025.

Chevron

Chevron will resume share repurchases in Q3 at an expected rate of $2-3 billion per year. Chevron has completed share repurchases in 13 of the last 17 years, returning over $50 billion in total to shareholders.

ConocoPhillips

The company lowered its capital and adjusted operating cost guidance for 2021 and announced plans to increase 2021 share repurchases by $1 billion, bringing the total planned return of capital to shareholders to roughly $6 billion for the year.

Eni

Alongside a €0.86 per share dividend in Q3, the Italian major is set to buy back €400 million in shares by the end of the year.

Royal Dutch Shell

Having reduced net debt by $12 billion since Q2 2020, focus now shifts to shareholder distribution for Shell. The company has rebased its dividend to $0.24 per share, an increase of 38% from Q1 2021, and plans to buy back up to $2 billion of its shares before year-end. This represents an expected full year 2021 shareholder distribution of around 20-30% of operating cash flow.

TotalEnergies SE

The French company’s board of directors has decided to allocate up to 40% of any additional cash flow generated above $60 per barrel to share buybacks. The value of these repurchases for 2021 has been widely reported to be at least $800 million.

Evaluate Energy helps investors and industry observers track energy company capital management trends and quarterly cash flow results. Click the links to find out more about Evaluate Energy and Evaluate Energy Documents. All $ references above are US dollars.

Download our full review of Q1 cash flow trends for 86 producers from Canada and the United States here.