Author: Mark Young

Private companies’ predominance in North American upstream M&A continued in Q4 2022 based on Evaluate Energy’s latest deal analysis.

Evaluate Energy’s new infographic shows that 81% of all global deal value – in an especially lacklustre quarter for dealmaking – was spent on North American assets, and that private companies were involved in the five highest-value U.S. and Canadian deals.

• The U.S. deals included the highest value Q4 deal worldwide that will see Continental Resources taken into private ownership, as well as acquisitions by Marathon Oil and Diamondback Energy.
• In Canada, the oilsands sector saw its first +$1 billion quarter in the post-pandemic era, fuelled by the $950 million acquisition of Greenfire Resources by M3-Brigade Acquisition III Corp.

“Acquisitions of private operators by public companies remain a key trend, in part due to a lack of appetite for oil and gas IPOs, which blocks a key monetization route for private operators,” said Eoin Coyne, senior M&A analyst. “Equally, private operators have been looking to monetize investments while oil and gas prices are relatively high.”

Evaluate Energy’s latest M&A infographic can be downloaded at this link.

Included within the infographic:

• More details on these private company deals
• Why global deal activity fell to record lows based on several metrics in Q4 and 2022 overall
• Evaluate Energy’s 2023 outlook for upstream M&A
• Regional breakdowns of all Q4 activity

 

 

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.

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

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

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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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 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.

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

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.

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:

• Rocked by volatility, investors want to see stable returns on their capital
• Building back better means managing financial risk
• Back-office automation, data driven decision-making is driving next wave of operational efficiency
• Producers focus on financial health, operational excellence, shareholder interests, and ESG concerns
• ESG factors becoming integrated into financial risk management
• Tough debt and equity markets mean living within means